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Does International Fragmentation of Production and Global Value Chains Participation Affect the Long-run Economic Growth?

Author

Listed:
  • Camila do Carmo Hermida
  • Anderson Moreira Aristides dos Santos
  • Mauricio Vaz Lobo Bittencourt

Abstract

This article aims to investigate whether the international fragmentation of production and the global value chains (hereafter GVCs) participation affects the economic growth for a set of 40 advanced and emerging economies. It considers four aspects related to the type of participation and position in GVCs captured by different value-added measures: (a) vertical specialisation index; (b) GVC participation index; (c) GVC position index in low-tech sectors; and (d) GVC position index in high-tech sectors. A panel autoregressive distributed lag (PARDL) model is pioneeringly employed to capture the long-term relationship between economic growth and our four measures for annual value-added data from 1995 to 2011, provided by the World Input–Output Tables (WIOT). The main long-run results indicate that (a) higher levels of international fragmentation of production and GVCs’ participation ensure higher GDP per capita growth rates; (b) the fragmentation and GVCs’ participation are more important to GDP growth than the gross exports as a percentage of GDP; (c) GVCs’ participation index, which considers both the ‘forward’ and ‘backward’ participation, is less important than the vertical specialisation, measured by the foreign intermediate imports; and (d the countries engaged in upstream positions in low-technology GVCs were positively and significantly benefitted in terms of growth. JEL Codes: F14, F43

Suggested Citation

  • Camila do Carmo Hermida & Anderson Moreira Aristides dos Santos & Mauricio Vaz Lobo Bittencourt, 2022. "Does International Fragmentation of Production and Global Value Chains Participation Affect the Long-run Economic Growth?," Foreign Trade Review, , vol. 57(4), pages 367-389, November.
    • Handle: RePEc:sae:fortra:v:57:y:2022:i:4:p:367-389
    DOI: 10.1177/00157325211050448
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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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