Fundamental Theorem on the Relationship between Trade Balances in Value Added and Gross Terms: Amendment

This paper amends Kuboniwa (2014). We present a proof of a fundamental theorem on the relationship between trade balances in value added and gross terms in a general model with many countries and many sectors: the total sum of a country’s trade balances with all other countries measured in value added equals that in gross terms. This theorem implies that the total sum of differentials between balances in value added and those in gross terms equals zero. Using an aggregated World Input-Output data (WIOD) of Groningen University with eight countries (BRICs, the USA, the EU, Japan and the rest of the world (ROW)) and 20 sectors for 2010, we show an empirical evidence of the theorem.