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The impact of global value chain participation on income inequality

Author

Listed:
  • Nur Carpa
  • Inmaculada Martínez-Zarzoso

Abstract

There is a considerable amount of discussion over the effect of global value chain (GVC) participation on the increasing levels of income inequality in developed and developing countries. This paper aims to contribute to a better understanding of the interlink between income inequality and GVC participation. For this purpose, a panel data analysis is conducted with recent GVC data from the UNCTAD-Eora database. The results from panel data estimations for a sample of 39 countries over the period 1995–2016 suggest that offshoring has a significant inequality reducing effect for developing economies in the long run. Although the estimation results also indicate that some negative distributional effects of GVC related trade emerge in the short run, these seem to be mainly short run reactions of the economy, which might be offset in the long run through the adjustment of the labor market towards a new long run equilibrium.

Suggested Citation

  • Nur Carpa & Inmaculada Martínez-Zarzoso, 2022. "The impact of global value chain participation on income inequality," International Economics, CEPII research center, issue 169, pages 269-290.
    • Handle: RePEc:cii:cepiie:2022-q2-169-17
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    Cited by:

    1. Adrian Espinosa-Gracia & Julio Sánchez-Chóliz, 2023. "Long waves, paradigm shifts, and income distribution, 1929–2010 and afterwards," Journal of Evolutionary Economics, Springer, vol. 33(5), pages 1365-1396, November.
    2. Ariel Luis Wirkierman, 2023. "Distributive Profiles Associated with Domestic Versus International Specialization in Global Value Chains," Working Papers Series inetwp200, Institute for New Economic Thinking.
    3. Capello, Roberta & Afonso, Damares Lopes & Perucca, Giovanni, 2025. "Trade-in-task and regional income inequalities," International Economics, Elsevier, vol. 181(C).
    4. Qiu, Yun & Zhou, Chao & Jiang, Chensheng & Tang, Biao & Li, Min, 2024. "M&As and the value chain of host countries in the “belt and road” — Based on path test of technological innovation," Technological Forecasting and Social Change, Elsevier, vol. 204(C).
    5. Gnangnon, Sèna Kimm, 2024. "Trade Policy Space, Aid for Trade and, Intra-African and External African Manufactured Exports," International Economics, Elsevier, vol. 180(C).
    6. Encinas Bartos, Kristina & Schwarzkopf, Julia & Mueller, Martin, 2024. "The role of trainings in improving supplier sustainability performance," World Development, Elsevier, vol. 175(C).
    7. Naeimah Alkharafi & Mariam Alsabah, 2025. "Globalization: An Overview of Its Main Characteristics and Types, and an Exploration of Its Impacts on Individuals, Firms, and Nations," Economies, MDPI, vol. 13(4), pages 1-33, March.
    8. Mumin, Yazeed Abdul & Ali, Williams, 2025. "Global value chains and income inequality in Africa," Sustainable Global Supply Chains Discussion Papers 8, Research Network Sustainable Global Supply Chains.
    9. Zhaoyang Cai & Yang Li & Shixiong Cao, 2025. "Why are some places developed and other places lagging behind? An analysis of 295 Chinese cities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 74(1), pages 1-26, March.
    10. Andrea Coveri & Elena Paglialunga & Antonello Zanfei, 2023. "Global value chains, functional diversification and within-country inequality: an empirical assessment," Working Papers 2302, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2023.
    11. Gnangnon, Sèna Kimm, 2023. "Effect of Aid for Trade on Recipient-Countries' Participation in Global Value Chains," EconStor Preprints 279713, ZBW - Leibniz Information Centre for Economics.
    12. Coveri, Andrea & Paglialunga, Elena & Zanfei, Antonello, 2024. "Global value chains and within-country inequality: The role of functional positioning," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 382-397.
    13. Duarte, Rosa & Espinosa-Gracia, Adrián & Jiménez, Sofía & Sánchez-Chóliz, Julio, 2022. "New insights on the relationship between the involvement of countries in global value chains, and intra- and inter-country inequalities," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 320-329.
    14. Emmanuel Baffour Gyau & Yaya Li & Michael Appiah, 2025. "Global digital transformation: discovering the impact of digitalization on income inequality in OECD countries, the moderating role of globalization," Economic Change and Restructuring, Springer, vol. 58(1), pages 1-37, February.
    15. Shuguang Liu & Xiaowen Tang & Yubin Zhao, 2024. "Global Value Chain Participation, Employment Structure, and Urban–Rural Income Gap in the Context of Sustainable Development," Sustainability, MDPI, vol. 16(5), pages 1-19, February.
    16. Shujiro URATA & Youngmin BAEK, 2025. "The Impact of Firms' GVC Participation on Wages," Discussion papers 25057, Research Institute of Economy, Trade and Industry (RIETI).
    17. Sèna Kimm Gnangnon, 2023. "Trade-Related Government Expenditure and Developing Countries’ Participation in Global Value Chains," Commodities, MDPI, vol. 3(1), pages 1-18, December.

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    Keywords

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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