How can value-added serve as a compass for development policy?
Abstract
The paper, which is a reflection to Péter Mihályi’s article published in the February 2026 issue of this Journal, argues that development policy should rely not on the absolute level of value added but on its ratio to gross output, the value-added content. This indicator more accurately reflects firms’ intrinsic value-creation capacity and their functional position within global value chains. The study revisits the interpretation of the smile curve and its country-specific patterns, arguing that the framework remains analytically useful. It also demonstrates that value-added data can serve as a reliable policy compass only when complemented by additional analyses – particularly wealth-account-based assessments – because measurement errors and opportunities for manipulation may distort conclusions. The paper summarises the main sources of distortion and the corrective mechanisms used in statistical practice.
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