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The transmission of productivity through global value chains: formal concept and application to recent developments in the EU27

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Abstract

Inspired by the ideas developed in Timmer (2017), this paper proposes a measure of Global Value Chain – Total Factor Productivity (GVC-TFP) and a decomposition of its changes into three informative factors: changes in factor requirements associated with efficiency gains/losses in the use of capital and labour, shifts in the distribution of value added due to changes in factor shares, and shifts in the composition of the value chain, which are mainly due to geographical relocation of production stages. Based on the World Input-Output Database (WIOD), we use this methodology to analyse the evolution of GVC-TFP in different sectors across EU27 Member States between 2000 and 2014. Comparing the periods before and after the Great Recession, we find a sharp contrast between the intensity, the sectoral composition, geographical contributions and the nature of the driving forces of GVC-TFP developments. In the context of the economic crisis following the COVID-19 pandemic, in which import dependency and supply security mark the debate on the future of the EU Single Market, we find that our methodology could contribute to a comprehensive assessment of strategic restructuring of value chains.

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  • David Martinez Turegano, 2021. "The transmission of productivity through global value chains: formal concept and application to recent developments in the EU27," JRC Research Reports JRC122076, Joint Research Centre.
    • Handle: RePEc:ipt:iptwpa:jrc122076
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    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC122076
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    1. Barry Eichengreen & Donghyun Park & Kwanho Shin, 2017. "The Global Productivity Slump: Common and Country-Specific Factors," Asian Economic Papers, MIT Press, vol. 16(3), pages 1-41, Fall.
    2. Timmer, Marcel P. & Los, Bart & Stehrer, Robert & de Vries, Gaaitzen J., 2016. "An Anatomy of the Global Trade Slowdown based on the WIOD 2016 Release," GGDC Research Memorandum GD-162, Groningen Growth and Development Centre, University of Groningen.
    3. Marcel Timmer, 2017. "Productivity Measurement in Global Value Chains," International Productivity Monitor, Centre for the Study of Living Standards, vol. 33, pages 182-193, Fall.
    4. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    5. Peter Bauer & Igor Fedotenkov & Aurelien Genty & Issam Hallak & Peter Harasztosi & David Martinez Turegano & David Nguyen & Nadir Preziosi & Ana Rincon-Aznar & Miguel Sanchez Martinez, 2020. "Productivity in Europe: Trends and drivers in a service-based economy," JRC Research Reports JRC119785, Joint Research Centre.
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    More about this item

    Keywords

    Productivity; value chain; sectoral heterogeneity; convergence; European Union;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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