IDEAS home Printed from https://ideas.repec.org/a/eee/inteco/v169y2022icp269-290.html
   My bibliography  Save this article

The impact of global value chain participation on income inequality

Author

Listed:
  • Carpa, Nur
  • Martínez-Zarzoso, Inmaculada

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

  • Carpa, Nur & Martínez-Zarzoso, Inmaculada, 2022. "The impact of global value chain participation on income inequality," International Economics, Elsevier, vol. 169(C), pages 269-290.
    • Handle: RePEc:eee:inteco:v:169:y:2022:i:c:p:269-290
    DOI: 10.1016/j.inteco.2022.02.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2110701722000105
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.inteco.2022.02.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Davide Del Prete & Giorgia Giovannetti & Enrico Marvasi, 2017. "Global value chains participation and productivity gains for North African firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(4), pages 675-701, November.
    2. Ben Shepherd, 2013. "Global Value Chains and Developing Country Employment: A Literature Review," OECD Trade Policy Papers 156, OECD Publishing.
    3. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2014. "Tracing Value-Added and Double Counting in Gross Exports," American Economic Review, American Economic Association, vol. 104(2), pages 459-494, February.
    4. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-1398, November.
    5. Paolo Figini & Holger Go¨rg, 2011. "Does Foreign Direct Investment Affect Wage Inequality? An Empirical Investigation," The World Economy, Wiley Blackwell, vol. 34(9), pages 1455-1475, September.
    6. Krugman, Paul R, 1993. "What Do Undergrads Need to Know about Trade?," American Economic Review, American Economic Association, vol. 83(2), pages 23-26, May.
    7. Mummolo, Jonathan & Peterson, Erik, 2018. "Improving the Interpretation of Fixed Effects Regression Results," Political Science Research and Methods, Cambridge University Press, vol. 6(4), pages 829-835, October.
    8. Marcel P. Timmer & Bart Los & Robert Stehrer & Gaaitzen J. de Vries, 2013. "Fragmentation, incomes and jobs: an analysis of European competitiveness [Who captures value in global supply chains?]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 28(76), pages 613-661.
    9. Reinhard Schunck, 2013. "Within and between estimates in random-effects models: Advantages and drawbacks of correlated random effects and hybrid models," Stata Journal, StataCorp LP, vol. 13(1), pages 65-76, March.
    10. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    11. Baltagi, Badi H. & Bresson, Georges & Pirotte, Alain, 2003. "Fixed effects, random effects or Hausman-Taylor?: A pretest estimator," Economics Letters, Elsevier, vol. 79(3), pages 361-369, June.
    12. Ms. Kimberly Beaton & Aliona Cebotari & Andras Komaromi, 2017. "Revisiting the Link between Trade, Growth and Inequality: Lessons for Latin America and the Caribbean," IMF Working Papers 2017/046, International Monetary Fund.
    13. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    14. Robert C. Johnson, 2014. "Five Facts about Value-Added Exports and Implications for Macroeconomics and Trade Research," Journal of Economic Perspectives, American Economic Association, vol. 28(2), pages 119-142, Spring.
    15. Krugman, P., 1993. "What Do We Need to Know About the International Monetary System?," Princeton Studies in International Economics 190, International Economics Section, Departement of Economics Princeton University,.
    16. R. Kaplinsky, 2000. "Globalisation and Unequalisation: What Can Be Learned from Value Chain Analysis?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(2), pages 117-146.
    17. Joseph L Dieleman & Tara Templin, 2014. "Random-Effects, Fixed-Effects and the within-between Specification for Clustered Data in Observational Health Studies: A Simulation Study," PLOS ONE, Public Library of Science, vol. 9(10), pages 1-17, October.
    18. Solt, Frederick, 2019. "Measuring Income Inequality Across Countries and Over Time: The Standardized World Income Inequality Database," SocArXiv mwnje, Center for Open Science.
    19. Wooldridge, Jeffrey M., 2019. "Correlated random effects models with unbalanced panels," Journal of Econometrics, Elsevier, vol. 211(1), pages 137-150.
    20. Dutt, Pushan & Mitra, Devashish & Ranjan, Priya, 2009. "International trade and unemployment: Theory and cross-national evidence," Journal of International Economics, Elsevier, vol. 78(1), pages 32-44, June.
    21. Stephen Jenkins, 2015. "World income inequality databases: an assessment of WIID and SWIID," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(4), pages 629-671, December.
    22. Bruno Casella & Richard Bolwijn & Daniel Moran & Keiichiro Kanemoto, . "Improving the analysis of global value chains: the UNCTAD-Eora Database," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    23. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    24. Javier Lopez Gonzalez & Przemyslaw Kowalski & Pascal Achard, 2015. "Trade, global value chains and wage-income inequality," OECD Trade Policy Papers 182, OECD Publishing.
    25. Antonia Lopez Villavicencio & Mariam Camarero & Cecilio Tamarit, 2021. "Macroeconomic effects of EU value chain participation," Working Papers hal-04159742, HAL.
    26. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    27. Ms. Faezeh Raei & Anna Ignatenko & Borislava Mircheva, 2019. "Global Value Chains: What are the Benefits and Why Do Countries Participate?," IMF Working Papers 2019/018, International Monetary Fund.
    28. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    29. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann & M. D. Parra & Stephan Klasen, 2014. "Does Aid Promote Donor Exports? Commercial Interest versus Instrumental Philanthropy," Kyklos, Wiley Blackwell, vol. 67(4), pages 559-587, November.
    30. Riju Joshi & Jeffrey M. Wooldridge, 2019. "Correlated Random Effects Models with Endogenous Explanatory Variables and Unbalanced Panels," Annals of Economics and Statistics, GENES, issue 134, pages 243-268.
    31. Pierluigi Montalbano & Silvia Nenci & Carlo Pietrobelli, 2018. "Opening and linking up: firms, GVCs, and productivity in Latin America," Small Business Economics, Springer, vol. 50(4), pages 917-935, April.
    32. Marcel P. Timmer & Abdul Azeez Erumban & Bart Los & Robert Stehrer & Gaaitzen J. de Vries, 2014. "Slicing Up Global Value Chains," Journal of Economic Perspectives, American Economic Association, vol. 28(2), pages 99-118, Spring.
    33. Peter Egger & Thomas Url, 2006. "Public Export Credit Guarantees and Foreign Trade Structure: Evidence from Austria," The World Economy, Wiley Blackwell, vol. 29(4), pages 399-418, April.
    34. Bartelsman, Eric J & Caballero, Ricardo J & Lyons, Richard K, 1994. "Customer- and Supplier-Driven Externalities," American Economic Review, American Economic Association, vol. 84(4), pages 1075-1084, September.
    35. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    36. Johnson, Robert C. & Noguera, Guillermo, 2012. "Accounting for intermediates: Production sharing and trade in value added," Journal of International Economics, Elsevier, vol. 86(2), pages 224-236.
    37. repec:dgr:rugggd:gd-130 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nenci, Silvia & Fusacchia, Ilaria & Giunta, Anna & Montalbano, Pierluigi & Pietrobelli, Carlo, 2022. "Mapping global value chain participation and positioning in agriculture and food: stylised facts, empirical evidence and critical issues," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 11(2), July.
    2. Amat Adarov & Robert Stehrer, 2021. "Implications of foreign direct investment, capital formation and its structure for global value chains," The World Economy, Wiley Blackwell, vol. 44(11), pages 3246-3299, November.
    3. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2019. "Global Value Chains and Wages: Multi-Country Evidence from Linked Worker-Industry Data," Open Economies Review, Springer, vol. 30(3), pages 505-539, July.
    4. Felice, Giulia & Tajoli, Lucia, 2021. "Trade balances and global value chains: Is there a link?," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 228-246.
    5. Dilmaghani, Maryam, 2021. "The gender gap in competitive chess across countries: Commanding queens in command economies," Journal of Comparative Economics, Elsevier, vol. 49(2), pages 425-441.
    6. Victor Kummritz, 2015. "Global Value Chains: Benefiting the Domestic Economy?," IHEID Working Papers 02-2015, Economics Section, The Graduate Institute of International Studies.
    7. Pleticha, Petr, 2021. "Who Benefits from Global Value Chain Participation? Does Functional Specialization Matter?," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 291-299.
    8. Michael Peneder & Gerhard Streicher, 2016. "De- versus Re-industrialisation: Is Structural Change Reversible?," WIFO Working Papers 506, WIFO.
    9. Reshef, Ariell & Santoni, Gianluca, 2023. "Are your labor shares set in Beijing? The view through the lens of global value chains," European Economic Review, Elsevier, vol. 155(C).
    10. Hongsheng Zhang & Bo Meng & Shuzhong Ma, 2018. "Determinants of China's bilateral trade balance in global value chains," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(5), pages 463-485, July.
    11. Richard Frensch & Jan Hanousek & Evžen Kocenda, 2012. "Incomplete Specialization and Offshoring across Europe," CESifo Working Paper Series 3809, CESifo.
    12. Giunta, A. & Montalbano, P. & Nenci, S., 2022. "Consistency of micro- and macro-level data on global value chains: Evidence from selected European countries," International Economics, Elsevier, vol. 171(C), pages 130-142.
    13. Jona-Lasinio, Cecilia & Manzocchi, Stefano & Meliciani, Valentina, 2019. "Knowledge based capital and value creation in global supply chains," Technological Forecasting and Social Change, Elsevier, vol. 148(C).
    14. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
    15. Stefan Pahl & Marcel P. Timmer, 2020. "Do Global Value Chains Enhance Economic Upgrading? A Long View," Journal of Development Studies, Taylor & Francis Journals, vol. 56(9), pages 1683-1705, July.
    16. Sebastian Kripfganz, 2017. "Sequential (two-stage) estimation of linear panel-data models," German Stata Users' Group Meetings 2017 03, Stata Users Group.
    17. Araújo, Inácio Fernandes de & Perobelli, Fernando Salgueiro & Faria, Weslem Rodrigues, 2021. "Regional and global patterns of participation in value chains: Evidence from Brazil," International Economics, Elsevier, vol. 165(C), pages 154-171.
    18. Inaki Arto & Erik Dietzenbacher & Jose Manuel Rueda-Cantuche, 2019. "Measuring bilateral trade in terms of value added," JRC Research Reports JRC116694, Joint Research Centre (Seville site).
    19. Anna Giunta & Domenico Scalera & Francesco Trivieri & Jeffrey B. Nugent & Mariarosaria Agostino, 2011. "Firm Productivity, Organizational Choice and Global Value Chain," Working Papers 2011R09, Orkestra - Basque Institute of Competitiveness.
    20. Chen, Quanrun & Chen, Xikang & Pei, Jiansuo & Yang, Cuihong & Zhu, Kunfu, 2020. "Estimating domestic content in China’s exports: Accounting for a dual-trade regime," Economic Modelling, Elsevier, vol. 89(C), pages 43-54.

    More about this item

    Keywords

    Global Value Chain; Offshoring; Inequality; Gini; Correlated random effects; Eora;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:inteco:v:169:y:2022:i:c:p:269-290. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.sciencedirect.com/science/journal/21107017 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.