Global value chain embeddedness, labour productivity and employment in the Asia-Pacific countries

Purpose - The purpose of this paper is to examine the effects of the global value chain (GVC) participation and the associated improvements in labour productivity and employment among 16 Asia-Pacific countries. Design/methodology/approach - First, the indicators of GVC participation are computed using annual multi-region input-output tables over the period 1990-2014. Second, the study examines the long-run association between GVCs and labour productivity through Pedroni (2004) and Westerlund (2007) panel cointegration techniques. Then in the third step, the long-run elasticities are estimated using dynamic ordinary least squares (DOLS) and fixed-random effects models. Finally, the direction of causality is examined using the Dumitrescu and Hurlin (2012) panel causality technique. Findings - The result shows an increasing participation of GVCs among Asia-Pacific countries. The findings also show the long-run relationship between GVCs and labour productivity. The long-run elasticities suggest the positive association of GVCs with labour productivity and employment. Further, the categorization of Asia-Pacific countries based on income groups reveals that improvement in labour productivity and employment outcomes is significantly greater in the case of middle-income countries. Finally, the results from panel causality infer that the direction of causality runs from GVCs to labour productivity and GVCs to employment. Practical implications - The findings enable policymakers to formulate appropriate policies in Asia-Pacific countries to keep the momentum of increasing their participation in GVC for boosting labour productivity and employment gains. Originality/value - To the author’s knowledge, this is the first empirical study examining the spillover effects of GVC on labour productivity and employment in case of Asia-Pacific countries.