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Can value chain integration explain the diverging economic performance within the EU?

Author

Listed:
  • Agnes Kügler

    (Austrian Institute of Economic Research (WIFO))

  • Andreas Reinstaller

    (Office of the Austrian Productivity Board)

  • Klaus S. Friesenbichler

    (Austrian Institute of Economic Research (WIFO))

Abstract

This paper studies the interplay of integration into EU value chains and industrial development measured by labour productivity. We focus on the mediating role of domestic institutions compared to technological determinants for the distribution of the economic value generated along the European and global value chains. Our integration indicator measures value chain trade within the Single Market relative to global value chain networks. Using a simultaneous equation model, we find an overall positive effect of integration on labour productivity, which is driven by upstream integration. While the effect of productivity on integration is positive, it decreases with increasing productivity levels. Highly productive industries rather seek global value chain trade than regional integration. Better domestic institutions facilitate EU integration, although they favour industries with less complex product portfolios and lower levels of knowledge cumulativeness. This creates politically unwanted specialisation effects leading to an unequal distribution of the economic value generated.

Suggested Citation

  • Agnes Kügler & Andreas Reinstaller & Klaus S. Friesenbichler, 2023. "Can value chain integration explain the diverging economic performance within the EU?," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(1), pages 25-47, March.
    • Handle: RePEc:spr:epolin:v:50:y:2023:i:1:d:10.1007_s40812-022-00236-y
    DOI: 10.1007/s40812-022-00236-y
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    More about this item

    Keywords

    EU integration; Value chains; Productivity; Institutions; Industrial development; Product complexity;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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