Program and Development Research

Program and Development Research

The Hypothetical Extraction Method as a Tool for Measuring Double Counting in Global Value Chains: Implications for Countries’ Development Levels

Document Type : Original Article

Authors
zahra Moshfegh 1
aliasghar banouei 2
ali taiebnia 3
1 Researcher
2 Faculty Member, Faculty of Economics, Allameh Tabataba’i University.
3 Faculty Member, Faculty of Economics, University of TehraN
10.22034/pbr.2025.521954.1529
Abstract
Conventional accounting frameworks and foreign trade statistics remain inadequate in disentangling the value added embodied in gross exports and, consequently, in accurately identifying the extent of double counting within global value chains. This measurement challenge obscures a critical dimension of international trade analysis, as double counting plays a pivotal role in shaping the degree and quality of a country’s integration into the global economy. Despite its significance, the issue of double counting and its relationship with levels of national development has received limited scholarly attention in recent years, particularly within the Iranian context. This article addresses the issue through two core research questions. First, to what extent can the measurement of double counting in the decomposition of value added within gross exports—analyzed in the context of bilateral trade flows—serve as a proxy for assessing countries’ levels of development? Second, in Iran’s trade relations, which group of partners, the Shanghai Cooperation Organization or the European Union, exhibits a higher degree of double counting? To explore these questions, the study employs the Hypothetical Extraction Method (HEM), applied to the World Input–Output Database covering 189 countries and 26 economic sectors over the period 1990–2017. The empirical results yield two principal insights. First, countries positioned in higher income strata systematically exhibit greater average levels of double counting, reflecting a more profound degree of integration into global value chains, whereas countries in lower income categories display markedly lower averages. Second, although Iran’s double counting with both groups of partners has remained relatively limited over the past two decades, the magnitude of its double counting with the European Union has consistently surpassed that observed with members of the Shanghai Cooperation Organization.
Keywords
"Double Counting"
"Economic Development"
"Value-Added Decomposition of Gross Exports"
"Shanghai Cooperation Organization" "European Union"

Subjects

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