Technology Level And The Global Value Chain

Abstract

This paper investigates the role of technology levels in shaping the structure of the global value chain (GVC) at the macro level. We incorporate Ricardian comparative advantage into the production of intermediate goods involving both snake- and spider-type supply chains to capture the overall GVC integration. We analytically find that the country with a higher technology level produces the intermediate inputs at production stages involving a higher degree of difficulty, which is consistent with the real data. Furthermore, we verify how well the model fits the observed data by executing the calibration procedure using data from the World Input-Output Database. Our findings indicate strong correlations between calibrated outcomes and the observed data, as high as 87.3% for the GVC participation value and 79.3% for the real wage, proving that our model is a plausible representation of the structure of the GVC.