Global value chains and environment performance: Insights from global database

Abstract

Our article is the first attempt to investigate the association between global value chains (GVC) and environmental performance (EP). We employ two dimensions, including human health's and ecosystem's protection, to capture the EP, while GVC is classified backward and forward based on the foreign and domestic value-added to the total exports. By applying the formal empirical estimation procedure to a global sample of 30 low-income and lower-middle-income and 27 upper-middle-income and 33 high-income countries during the 2000 to 2018 period, some key findings are highlighted. Our estimates emphasize the importance of GVCs on EP through their influences on environmental health and ecosystem vitality. By distinguishing between the effects of different types of GVC, we reveal that being engaged in forward GVC plays a more critical role in improving the environment than backward GVC. By studying the short-run and long-run effects, our study suggests that the GVC involvement has adverse effects in the short term, but positive results appear in the long term. Notably, the investigation into the mechanism of the GVC-EP nexus provides empirical evidence to explain how being included in GVCs affects the environment and sustainability of a country. Finally, our study indicates that there are heterogenous effects of GVC on EP and these effects are conditional on a country's income level. It is more likely that the impacts of GVC become more pronounced for high-income countries.