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Global Value Chains: Benefiting the Domestic Economy?

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Abstract

Global Value Chains (GVCs) have become a central topic in trade and development policy but little is known about their actual impact on economic performance because data availability has been limited. Using a new unique set of Inter- Country Input-Output tables with extensive country coverage, I look at the relationship between GVC participation and domestic value added at the industry-level to determine if and for whom GVCs are beneficial. I show that GVC participation is positively related to domestic value added along the value chain. However, this effect is only significant for middle- and high-income countries. Deriving novel source/destination country-specific indicators, I present evidence on theoretical transmission channels between GVCs and domestic value added that explain these results. More specifically, I find support for productivity enhancing effects through cost savings when richer countries source from low-wage countries. In contrast, low- and middle-income countries only benefit from technology upgrading and spillovers if they have sufficient levels of absorptive capacity.

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  • Victor Kummritz, 2015. "Global Value Chains: Benefiting the Domestic Economy?," IHEID Working Papers 02-2015, Economics Section, The Graduate Institute of International Studies.
  • Handle: RePEc:gii:giihei:heidwp02-2015
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    Cited by:

    1. Jan Fagerberg & Bengt-Åke Lundvall & Martin Srholec, 2018. "Global Value Chains, National Innovation Systems and Economic Development," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 30(3), pages 533-556, July.
    2. Marta Solaz, 2018. "Value added and participation in global value chains: The case of Spain," The World Economy, Wiley Blackwell, vol. 41(10), pages 2804-2827, October.
    3. Chong-Sup Kim & Seungho Lee & Jihyun Eum, 2019. "Taking a Bigger Slice of the Global Value Chain Pie: An Industry-Level Analysis," Working Papers 2019-3, Economic Research Institute, Bank of Korea.
    4. Alberto Criscuolo & Ifeyinwa Uchenna Onugha & Gonzalo Varela, 2014. "Oriental Republic of Uruguay," World Bank Publications - Reports 30469, The World Bank Group.
    5. Carlos A. Carrasco & Edgar Demetrio Tovar-García, 2021. "Trade and growth in developing countries: the role of export composition, import composition and export diversification," Economic Change and Restructuring, Springer, vol. 54(4), pages 919-941, November.
    6. repec:era:wpaper:dp-2015-50 is not listed on IDEAS
    7. Guy Roland Assamoi & Shaoyuan Wang & Yobouet Thierry Bienvenu Gnangoin & Akadje Jean Roland Edjoukou, 2019. "Foreign Inputs and Changes in Domestic Value Added Exports: Empirical Evidence from Latin American Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 9(3), pages 244-251.
    8. Halit Yanikkaya & Abdullah Altun, 2020. "The Impact of Global Value Chain Participation on Sectoral Growth and Productivity," Sustainability, MDPI, vol. 12(12), pages 1-19, June.
    9. Marta Solaz Alamá, 2016. "Cadenas globales de valor y generación de valor añadido: El caso de la economía española," Working Papers. Serie EC 2016-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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    More about this item

    Keywords

    Global Value Chains; International Trade; Economic Development;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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