Highest Forward Linkages across Sectors

FIGURE 5.9 Global Innovator and Low-Skill Tradable Services Have among the Highest Forward Linkages across Sectors

Domestic value added embodied as inputs in economywide production (as a share of output and as value in US$, millions) by industry, average across countries, 2015

Percentage share of forward linkages in total output (dots) 0 10 20 30 40 50 60 70 80

Other business and ICT Distribution and trade Finance Energy extraction Transportation Communications Primary agriculture Chemicals, rubber, and plastic products Construction Ferrous metals and metals n.e.c. Machinery and equipment n.e.c. Other services Metal products Other primary Other consumer services Mineral products n.e.c. Water supply Paper products and publishing Processed foods Manufactures n.e.c. Insurance Wood products Textiles Transportation equipment Beverages and tobacco products Wearing apparel Leather products

0 5,000 10,000 15,000 20,000 25,000 Value of forward linkages (US$, millions) Nonservices Services

Source: Calculations based on World Bank’s Export Value Added Database (EVAD). Note: The dataset covers 118 countries across regions and income levels. The bars (measured by the bottom axis) represent the overall value of a sector’s domestic value added embodied as inputs in economywide production. The green dots (measured by the top axis) represent the share of these forward linkages in total output. “Nonservices” includes agriculture and industry. “Other business and ICT” includes professional, scientific, and technical services. “Distribution and trade” includes wholesale and retail trade. “Other services” refers to social, community, and personal services. ICT = information and communication technology; n.e.c. = not elsewhere classified.

highlight the mix of policy areas discussed above that are either expected to have greater urgency or represent a new set of issues to be addressed. The list of indicators used here is not exhaustive; this exercise illustrates some of the key dimensions in this agenda.

Performance on the 4Ts: Relevant Indicators

Trade. A country’s preparedness to engage in international trade in services combines measures of services trade restrictions, the ease of doing business, and restrictions on cross-border data flows. The World Bank’s STRI measures policies that impose barriers on international trade transactions. The World Bank’s Doing Business data capture the extent of regulatory burdens facing the private sector. To capture restrictions on cross-border data flows, countries are assigned a score of 0 if they have an open transfer model, 1 if they have a conditional transfer model, and −1 if they have a limited transfer model (data localization), based on findings from Ferracane and van der Marel (2020).

Technology. A country’s capabilities to support technology diffusion and innovation combines the extent of internet use among the wider population and email use in firms. The share of the population with access to ICT gives a measure of the potential for a broader digital economy. Similarly, the share of firms that use email, drawn from the World Bank Enterprise Surveys, is a simple measure of how many firms are using basic digital technologies in their business operations. They reflect whether firms have the building blocks for the adoption of more sophisticated digital technologies, ranging from enterprise planning software and matching platforms to data analytics.

Training. A country’s capabilities to respond to the rising demand for skills combines measures of tertiary education enrollment, digital skills, and firms’ management practices. Tertiary school enrollment captures foundational skills that foster adaptability, critical thinking, and communication.10 The digital skills index of the World Economic Forum (WEF) measures software programming, coding, or complementary skills in engineering that will be important to ensure that more people can access jobs that are likely to become increasingly cognitive with more technology-intensive business processes. Finally, measures of managerial practices that strengthen firms’ capabilities for upgrading are captured from the World Bank Enterprise Surveys and the Centre for Economics Performance’s WMS.

Targeting. A country’s potential to target key upstream services scales the magnitude of forward linkages, drawn from the World Bank’s Export Value Added Database, according to the size of the relevant sectors in the economy. It combines two elements: First, the shares of forward linkages in the outputs of ICT, professional, and financial services (the subsectors in which such shares are highest, on average, across countries) are multiplied by the shares of these services in total employment. Second, the shares of forward linkages in the outputs of wholesale and retail trade and transportation services (the subsectors with the highest