Global value chains: benefiting the domestic economy?

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.


Publication infos:
Geneva, The Graduate Institute of International and Development Studies, 2015
Publication year:
2015
Number of pages:
53 p.
Collection:
Graduate Institute of International and Development Studies Working Paper ; no: 02/2015



 Record created 2015-04-01, last modified 2019-03-01

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