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Productivity spillovers in the GVC: The case of Poland and the New EU Member States

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  • Jan Hagemejer

Abstract

The New Member States have been experiencing firm internationalization not only through inward foreign direct investment but also through exporting, importation of foreign technology in investment goods and increased use of imported intermediates. We argue that there are important productivity spillovers within the global value chains, ie. FDI alone does not tell the whole story of the reallocation processes going on in the economies of the NMS. We augment the standard TFP spillover empirical model with modern measures of GVC participation to contribute to the debate on the 'desired' country/sector/firm position in the GVC. In our study we combine firm-level data with international sectoral input-output data. Firm level data come from the Amadeus database. In order to maximize the number of observations, we combine data from multiple Amadeus waves. The resulting firm-level data sample covers the period of 1997-2011. The study has two parts. In the first part, we analyze the foreign firm producticvity premia over the domestic firms. We check if the foreign productivity premium is affected by the position of the firm in the Global Value Chain and the foreign content of sectoral exports. We do that in order to verify if there are benefits of the positition in the GVC that lead to lowering the productivity gap between foreign and domestic firms. In the second part, we augment the methodology by Smarzynska-Javorcik (2004) with measures of GVC participation to analyze the various channels of internationalization. In order to obtain a measure of total factor productivity we use the now-standard approach by Levinsohn and Petrin (2003). We focus on Poland but we also run the spillover equations on the full New Member States sample and on the individual NMS. All regressions control for country/sector specificity and the business cycles. We show that increased foreign content of exports brings additional productivity gains on top of the ones attributed to exporting and FDI spillovers that are mostly backward in nature. Moreover, we show that in selected cases, participation in the GVC leads to a smaller productivity gap between foreign and domestic firms. In Poland and Hungary the productivity gains for domestic firms are located in production of intermediate goods with high foreign value content as well as in goods located close to the final demand. In many other NMS the benefits are concentrated close to the final demand.

Suggested Citation

  • Jan Hagemejer, 2016. "Productivity spillovers in the GVC: The case of Poland and the New EU Member States," EcoMod2016 9250, EcoMod.
  • Handle: RePEc:ekd:009007:9250
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    References listed on IDEAS

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    1. Jan Hagemejer & Marcin Kolasa, 2011. "Internationalisation and Economic Performance of Enterprises: Evidence from Polish Firm‐level Data," The World Economy, Wiley Blackwell, vol. 34(1), pages 74-100, January.
    2. Martin Bijsterbosch & Marcin Kolasa, 2010. "FDI and productivity convergence in Central and Eastern Europe: an industry-level investigation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(4), pages 689-712, January.
    3. Pol Antras & Davin Chor & Thibault Fally & Russell Hillberry, 2012. "Measuring the Upstreamness of Production and Trade Flows," American Economic Review, American Economic Association, vol. 102(3), pages 412-416, May.
    4. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
    5. Iršová, Zuzana & Havránek, Tomáš, 2013. "Determinants of Horizontal Spillovers from FDI: Evidence from a Large Meta-Analysis," World Development, Elsevier, vol. 42(C), pages 1-15.
    6. Kolasa Marcin, 2008. "How does FDI inflow affect productivity of domestic firms? The role of horizontal and vertical spillovers, absorptive capacity and competition," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(1), pages 155-173.
    7. Przemyslaw Kowalski & Javier Lopez Gonzalez & Alexandros Ragoussis & Cristian Ugarte, 2015. "Participation of Developing Countries in Global Value Chains: Implications for Trade and Trade-Related Policies," OECD Trade Policy Papers 179, OECD Publishing.
    8. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
    9. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    10. Jan Hagemejer & Mahdi Ghodsi, 2016. "Up or down the value chain? The comparative analysis of the GVC position of the economies of the new EU member states," Working Papers 2016-23, Faculty of Economic Sciences, University of Warsaw.
    11. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, vol. 42(1), pages 51-74, October.
    12. Zhi Wang & Shang-Jin Wei & Kunfu Zhu, 2013. "Quantifying International Production Sharing at the Bilateral and Sector Levels," NBER Working Papers 19677, National Bureau of Economic Research, Inc.
    13. Jozef Konings, 2001. "The effects of foreign direct investment on domestic firms," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(3), pages 619-633, November.
    14. 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.
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    Cited by:

    1. Jan Hagemejer, 2016. "Exports and growth in the New Member States. The role of global value chains," Working Papers 2016-24, Faculty of Economic Sciences, University of Warsaw.
    2. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2018. "Wage Response To Global Production Links – Evidence For Workers From 28 European Countries (2005–2014)," GUT FME Working Paper Series A 51, Faculty of Management and Economics, Gdansk University of Technology.
    3. Jan Hagemejer & Joanna Tyrowicz, 2017. "Upstreamness of employment and global financial crisis in Poland: the role of position in the global value chains," GRAPE Working Papers 15, GRAPE Group for Research in Applied Economics.
    4. Aleksandra Kordalska & Joanna Wolszczak-Derlacz & Aleksandra Parteka, 2016. "Global value chains and productivity gains: a cross-country analysis," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 41, pages 11-28.
    5. repec:sgm:resrep:v:2:i:22:y:2016:p:201-212 is not listed on IDEAS

    More about this item

    Keywords

    New EU Member States; Trade issues; Growth;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • F10 - International Economics - - Trade - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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