Global value chain linkages and domestic value-added content: Empirical evidence

Abstract

PurposeThis paper aims to examine the relationship between global value chains (GVCs) and domestic value-added content (DVA) in a panel of 58 countries for the period 2005–2015.Design/methodology/approachFirst, the authors quantify the refined measures of GVC linkages by using the Borin and Mancini (2019) decomposition technique. Second, the authors apply the feasible generalised least squares method to test the relationship between GVCs and DVA empirically.FindingsFirst, the authors find that GVC links are crucial to the enhancement of DVA. Second, a study at the sectoral level reveals that GVC links in the primary sector raise DVA whilst reducing DVA in the services sector. Third, the authors find that only upstream activities enhance value-added content. Fourth, the authors note the augmenting role played by national policies in mediating the gains associated with GVCs. Finally, the authors note that the outcomes associated with GVCs are consistent when the sample of countries is divided into groups based on income.Practical implicationsThe results lead us to urge policymakers to promote greater integration of business activities into GVCs to reap their benefits.Originality/valueThis paper contributes to the research on the impact of GVCs on DVA by emphasising the significance of the types of GVC activities and policies that improve DVA.