Abstract
Integration within the EU single market increases the interconnection and interdependence of the EU economies. Global value chain (GVC) participation has become one of the most widely used indicators to measure the dispersion of the production process among different countries. The EU member states rate differently in the GVC participation index. The highest participation is in Luxembourg and Slovakia and the lowest is in Croatia. The aim of this paper is to identify the most important variables that influence the GVC participation index in the EU member states (EU-15 and EU new member states). The research employs dynamic panel data (GMM) methodology. The obtained results are very similar for the EU-15 and EU-NMS indicating that the most important drivers of GVC participation are: GDP growth, lag GVC participation, FDI, development of financial sector, share of services in GDP and share of high-tech products in export, and level of wages. However, the indicators and strength of the influence of some of these variables differ between the two groups of countries.
Highlights
Global value chains (GVCs) are the result of the fragmentation of production and processing segmentation in many phases or processes that take place in numerous locations in different countries
The aim of this paper is to identify the most important variables that influence the GVC participation index in the EU member states (EU-15 and EU new member states)
The GVC participation index differs among EU member states, where the group of EU core and EU new member states have higher indexes than the Southern members
Summary
Global value chains (GVCs) are the result of the fragmentation of production and processing segmentation in many phases or processes that take place in numerous locations in different countries. In this way, they have contributed to the increasing interconnection between nations. The most well-known measure of a country’s position in GVCs was created by Koopman et al (2010) who introduced the GVC participation index This index is calculated by summarising the domestic value added in foreign export (forward participation) and foreign value added in domestic export (backward participation). The higher the value, the higher the country’s participation in GVC, i.e., trade in intermediate products is more prevalent in total trade and the production process is more fragmented
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