Importance of Value Added

Value added is a central concept when it comes to economics. It refers to the value that each good or service acquires in the production chain, that is, the value that is generated in each new participation in regards to the work or processing of a good, work or processing that can be analyzed in units monetary. In this regard, there is a tax that is usually levied on consumption and which is called tax on value added (VAT); said tax seeks to tax the value added throughout the production chain, a circumstance that is achieved by a system of tax debits and credits that ends up falling on the consumer.

Perhaps the concept can be explained more efficiently using an example. Thus, if we take a chair made of wood, it will have several steps in its production. In the first instance, the wood must be extracted, then it must be processed, then cut and finally the chair must be built. In today's economy there is a whole separation of these tasks, a separation that has to do with the competitiveness

of each economic agent. Thus, it may happen that one agent focuses on the extraction of wood, another on its treatment, etc. Each of these actors takes the product at an earlier stage and adds value to it, that is, contributes to its use at later stages. The final stage is the one in which the chair is built ready to be used by a person.

The countries with the highest development rates are those that can add more value to their products, value that results in a better quality of life for their citizens. For a long time it was considered that this type of products with greater value added were those that had to do with the secondary sector and with the sector of services of high complexity, such as that which is related to computing. However, at present one can speak of a wide value added Also in the primary sector, the one that has to do with the production of raw materials. Indeed, more and more over time, an increase in technology in this area can be glimpsed, technology related to efficient soil management, with Applications biotechnological or with processes that tend to increase the productivity. Thus, we can see how in the productive sectors the structure of value added I was able to change significantly over time.