Factors determining participation of developing countries in global value chains

Abstract

The paper examines the key economic and institutional factors that determine the participation of developing countries in global value chains (GVCs). To assess the impact of a number of factors on the foreign value added in export of developing countries, an econometric model for 84 countries for the period 1999-2018 is used. Obtained results indicate that developing countries with higher per capita income, more developed manufacturing industry, more open economy, less administrative burden on business and those actively engaged in foreign direct investment (FDI) activities demonstrate higher upward participation in the GVCs. It is also shown that trade liberalization and investments in foreign production strengthen the positions of developing countries in the GVCs in the long term. Based on these findings, recommendations are formulated for the state policy of these countries in order to accelerate their integration into more complex stages of the GVCs.