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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 set of OECD 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 whole value chain. However, this effect is only significant for middle-- and high--income countries. Deriving novel source/using country-- specific indicators, I furthermore present evidence on theoretical transmission channels between GVCs and domestic value added. I find support for productivity enhancing effects through cost savings when rich countries source from low--‐wage countries. In contrast, I find only little evidence on gains through technology transfer and spillovers for low--‐income countries. Overall, the results indicate that foreign value added works as a complement rather than a substitute to domestic value added and that GVC participation benefits the domestic economy.

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