Glossary

Automation of production: The use of machines and automatic devices to perform part of the production process. It is generally used to reduce human intervention and is therefore considered to replace human labour by machines.

Backward participation in global value chains: Import of foreign inputs used in products for export. This is similar to the foreign value added embodied in gross exports (see below).

Cognitive skills: These skills involve the understanding, interpretation, analysis and communication of complex information and the ability to apply this information in situations of everyday life. These skills are general in nature and relevant for all kinds of occupations, considered necessary to provide a foundation for effective and successful participation in social and economic life.

Comparative advantage in trade: One of the most important concepts in international trade theory, which refers to the ability of a country to produce goods and services at a lower opportunity cost than other countries and therefore to specialise in producing this product. This is the case even if the country holds an absolute advantage in all products, or if it can produce more or better goods than other countries. In the case of two countries, two industries, and two factors of production, high-skilled and low-skilled human capital, the country that is more endowed with high-skilled workers is said to have a comparative advantage in the industry that is more intensive in high-skilled tasks.

Complementarity of skills: If efficiency improves when skills of different workers are used together in the production process, those skills are said to be complementary.

Distance to final demand: The number of stages of production that are left before goods or services produced reach final demand. Its measure is based on trade in value added data.

Domestic value added embodied in gross exports: Value added generated domestically by the exporting industry or country during production processes as well as any value added coming from activities earlier in the value chain, such as research and development, and design.

Downstream activities: Activities at the end of a value chain, such as marketing, branding and customer service.

Final demand: Final goods and services consumed or invested by households, government and businesses.

Foreign value added embodied in gross exports: Value from abroad of intermediate goods and services imported and used in a domestic industry’s exports. It can be expressed as a share of gross exports or a share of final demand, as an indicator of backward participation in global value chains.

Forward participation in global value chains: Production of inputs used in third countries’ exports.

Fragmentation of production: Organisation of production in which different stages are divided among different suppliers or subsidiary companies that can be located in different countries. As a result, products traded between firms in different countries can be intermediate goods and tasks instead of final goods and services.

Global value chains: International production, trade and investments are increasingly organised within global value chains, in which the different stages of the production process are located across different countries. Globalisation motivates companies to restructure their operations internationally through outsourcing and offshoring of activities.

Industry cluster: A group of firms in the same geographic area that share markets, technologies and skills needs, and that are often linked by buyer-seller relationships.

Intermediate goods: Goods used as inputs in the production of other goods.

International co-authorship: Scientific collaboration on research articles between scientists who reside in different countries.

International co-invention: Innovation, often measured as patents, with several inventors who reside in different countries.

Job quality: Various aspects of employment that contribute to the well-being of workers.

Knowledge spillover: Information or ideas emerging from other countries or firms that can be acquired without payment.

Length of global value chain: The number of stages involved in the production process of an industry. It is measured using trade in value added data.

Non-compete clause: A clause under which an employee agrees not to use information acquired during employment in subsequent jobs for a specific period of time.

Offshoring: Relocation of a business activity from one country to another – typically an operational activity, such as assembly, and sometimes a downstream (e.g. marketing) or an upstream (e.g. research and development) activity.

Participation in global value chains: The extent to which countries’ exports are integrated in an internationally fragmented production network. Indicators of participation in global value chains are based on trade in value added data.

Relative task intensity of industry: The extent to which an industry involves a more frequent performance of one task than another one. It is measured by the ratio of the frequencies of the performance of two tasks, by industry.

Revealed comparative advantage: A measure of the performance of a country in one industry relative to its performance in all other industries and as compared with the performance of a reference group of countries using export flows. It infers the existence of a comparative advantage (or stronger performance) of this country in an industry relative to other countries and all other industries. The indicator is based on trade in value added data. It captures countries’ specialisation in industries within global value chains.

Skills advantage: An individual is said to have a relative skills advantage in one skill if she is more proficient in that skill than in another one. It is measured by the ratio of scores in two skills (e.g. numeracy to literacy scores). This advantage determines which industry a worker is most suited to. An individual is said to have an absolute advantage if she is highly skilled in both skills. This advantage determines a worker’s productivity on the job, depending on the industry’s skills requirements.

Skills mix: A combination of various skills, possibly of various types. It is measured by considering two skills (e.g. literacy and numeracy), and looking at the scores in the two skills, the ratio of the scores in the two skills, and the correlation between these two elements. The characteristics of the skills mix of the whole population in an economy determine a country’s industry specialisation.

Social and emotional skills: Skills involved in working with others (friendliness, respect, caring), in achieving goals (perseverance, self-control, passion for success) and in managing emotions (calm, optimism, confidence). They are based on recognised taxonomies in personality psychology, particularly the “Big Five” factors (extraversion, agreeableness, conscientiousness, emotional stability, and openness).

Specialisation: A country’s ability to produce more in industries where it has a comparative trade advantage. It is measured using trade in value added data.

Task-based skills: Skills related to the performance of business tasks at work. They are measured based on information from the background questionnaire in the Survey of Adult Skills.

Technologically advanced industries: Manufacturing industries using cutting-edge technology, and complex business services industries that use and/or develop sophisticated technologies.

Technology transfer: The transfer of new technology from an inventor to a secondary user.

Trade in gross terms: Gross flows of goods and services reported every time they cross a border.

Trade in value added terms: Net trade flows between countries, which account for the origin of value added embodied in any goods or services crossing a border.

Unobservable skills dispersion: The dispersion of skills of a country’s population after accounting for observable skills determinants such as the level of education and training, age, and socio-economic background.

Upstream activities: Activities at the beginning of a value chain, such as the development of a new concept, research and development, manufacturing of key components, and production of raw materials.