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Global value chains and aggregate productivity growth in developing countries: the role of intra-sectoral allocation and structural change

Author

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  • Solomon Owusu

    (Boston University Frederick S. Pardee School of Global Studies
    University of Oxford
    German Institute of Development and Sustainability)

Abstract

Participation in global value chains (GVC) has recently been highlighted as a pathway to fast-track development in productivity growth through productive and allocative efficiency, particularly in Africa and other developing countries where structural change has stalled. This paper investigates how participation in GVC affects aggregate labor productivity growth. It further quantifies how the aggregate labor productivity growth effects of GVC are distributed among the sub-components—within (intra-sector) effect and structural change (inter-sector) effect. Using data for a sample of 46 developing countries and utilizing panel fixed-effect and instrumental variable estimations, the study finds that participation in GVC has a positive and significant effect on aggregate labor productivity growth in developing countries. These benefits arise in all countries in the study sample including those in Africa but most strongly in countries in Asia and Latin America. This is regardless of whether countries are integrated into GVC through backward or forward participation, however, with a relatively stronger positive effect through forward participation. The results from the analysis of the two sub-components of aggregate labor productivity growth show that GVC participation has a positive and significant effect on the within component by inducing an efficient reallocation of resources within but not across sectors.

Suggested Citation

  • Solomon Owusu, 2025. "Global value chains and aggregate productivity growth in developing countries: the role of intra-sectoral allocation and structural change," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 161(1), pages 89-119, February.
    • Handle: RePEc:spr:weltar:v:161:y:2025:i:1:d:10.1007_s10290-024-00550-8
    DOI: 10.1007/s10290-024-00550-8
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    More about this item

    Keywords

    Global value chains; Productivity growth; Structural change; Developing countries;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F15 - International Economics - - Trade - - - Economic Integration
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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