The value added by one step of production is the difference in monetary value of this step and its previous step. Added value that occurs after export is of no concern to the GDP of the exporting country.
For example, a consumer buys a US-made bookshelf in China for $300. If the wholesale export price is $250 in the US, $250 will be accounted in US GDP, whereas $50 (value added by final distribution step) will be accounted in China’s GDP.
| Product | Unit Price | Value Added |
|---|---|---|
| lumber | 50 | 50 |
| bookshelf parts | 100 | 50 |
| bookshelf (wholespace) | 250 | 150 |
| bookshelf (retail) | 300 | 50 |