Structural reforms and global value chains: a dynamic analysis of OECD countries based on local projections

This paper explores the dynamic effects of structural reforms on global value chain (GVC) positions at both national and sectoral levels. Employing local projections and augmented inverse probability weighting (AIPW) methods on a sample of 25 OECD countries from 1990 to 2015, it shows that both product and labor market reforms could improve GVC integration but with different patterns. While product market reforms generate long-lasting improvements, labor market reforms produce only short-term effects. A deeper analysis of GVC components finds that product market reforms significantly and sustainably increase upstreamness, with modest but positive effects on downstreamness. In contrast, labor market reforms reduce both upstreamness and downstreamness, though these impacts are largely temporary. Finally, sectoral analysis highlights heterogeneous impacts, with product market reforms strengthening upstreamness across most industries but having limited effects on downstreamness. These results offer important policy insights on the importance of coordinated reforms to provide a conducive environment for sustained GVC integration.