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Economic Consequences of Trade and Global Value Chain Integration : A Measurement Perspective

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  • Borin,Alessandro
  • Mancini,Michele
  • Taglioni,Daria

Abstract

This paper presents a new approach to measuring Global Value Chain (GVC) participation, essential for informed policy-making. It introduces a tripartite classification of GVC involvement—backward, forward, and two-sided—extending beyond trade to include production data. GVCs, vital for global economic growth, are networks through which companies internationally produce goods and services. The advanced framework accurately assesses how different combinations of domestic output, trade, and GVC integration correlate with growth and output stability. The paper finds that traditional trade-based GVC metrics significantly underestimate global GVC activity and misrepresent participation in key sectors like services and upstream manufacturing. They also exaggerate risks during critical stages like early trade liberalization in large economies. Additionally, it shows that traditional backward-forward classifications overestimate backward linkages. The new metrics, applied to established models, effectively predict trade disruption impacts, indicating that GVC participation increases exposure to external shocks but also enhances overall output stability by mitigating local shocks. Furthermore, GVC participation is a key driver of the positive trade-income growth correlation. The complete dataset of these new measures is available on the World Bank’s WITS Platform, and it is regularly updated, providing a key resource for GVC analysis.

Suggested Citation

  • Borin,Alessandro & Mancini,Michele & Taglioni,Daria, 2021. "Economic Consequences of Trade and Global Value Chain Integration : A Measurement Perspective," Policy Research Working Paper Series 9785, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9785
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    References listed on IDEAS

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    1. Pol Antras & Davin Chor & Thibault Fally & Russell Hillberry, 2012. "Measuring the Upstreamness of Production and Trade Flows," American Economic Review, American Economic Association, vol. 102(3), pages 412-416, May.
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    Cited by:

    1. Wannaphong Durongkaveroj, 2023. "Emphasis on domestic value added in export in the era of global value chain: evidence from Thailand," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(3), pages 703-729, September.
    2. Bhushan Praveen Jangam & Hari Venkatesh, 2022. "Global Value Chains and Exchange Rate Disconnect," Economic Papers, The Economic Society of Australia, vol. 41(4), pages 347-359, December.
    3. Fabien RONDEAU & YOSHIDA Yushi, 2023. "Global Value Chains and Exchange Rate Pass-through into the Import Prices of Japanese Industries," Discussion papers 23013, Research Institute of Economy, Trade and Industry (RIETI).
    4. Richard Baldwin & Rebecca Freeman & Angelos Theodorakopoulos, 2022. "Horses for Courses: Measuring Foreign Supply Chain Exposure," NBER Working Papers 30525, National Bureau of Economic Research, Inc.
    5. Dario Guarascio & Jelena Reljic & Giacomo Cucignatto & Giuseppe Celi & Annamaria Simonazzi, 2023. "Between a rock and a hard place. Long-term drivers of EU structural vulnerability," Working Papers in Public Economics 237, University of Rome La Sapienza, Department of Economics and Law.

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