Domestic Value Research Articles

Integration into regional or global value chains and economic upgrading prospects: an analysis of the East African Community (EAC) bloc

The aim of the study was to assess the integration into regional or global value chains and economic upgrading prospects in the East African Community (EAC) bloc. We conducted a comparative analysis of participation in global value chain (GVC) among EAC member states and assessed the determinants of economic upgrading in the region using UNCTAD-Eora GVC Panel data from 2005 to 2018. The results show that Kenya, Tanzania and Uganda are relatively better integrated through two channels of GVC participation, namely foreign value added (FVA) and domestic value added. However, for indirect-value added channel, Kenya had the highest score, the rest member states had relatively lower mean scores. The overall results show that EAC’s participation in GVC still resides in upstream low- and middle-value-added production activities, which limits its competitiveness compared to other regions. The empirical results show the positive and significant effect of domestic credit, foreign direct investment, quality of institutions and FVA on economic upgrading. However, a positive but insignificant association with economic upgrading was observed for human capital and GDP per capita. Infrastructure quality was negatively and significantly associated with economic upgrading. These results suggest that improving infrastructure connectivity and further strengthening institutional governance would reduce trade costs and promote greater investments, product and service diversification, leading to deeper economic upgrading in the region. At the policy level, the adoption of effective national and regional industrial policies would promote innovation and human capital development, attract foreign direct investment and help address market and coordination deficiencies in the region.

FDI in Tourism and the Feasibility of Incorporating the UN Guiding Principles on Business and Human Rights in Indonesia

Foreign direct investment (FDI) is critical to Indonesia's economic development. Tourism is one of the most appealing investment industries. It has made a significant contribution to employment creation, tax revenue and domestic value addition. However, FDI in tourism has had negative environmental consequences. Moreover, Indonesian trade agreements and investment treaties do not reflect environmental concerns. The schedule under the General Agreement on Trade in Services (GATS) follows a similar trend, although other countries’ practices have shown that Indonesia can add this concern. Domestic laws and policies are also silent because the goal of economic growth outweighs protecting the environment. The United Nations Guiding Principles on Business and Human Rights (Guiding Principles) govern states' obligations to defend human rights and companies' obligations to respect and give remedy. This article examines the feasibility of incorporating the Guiding Principles into FDI in tourism. The Guiding Principles, together with the Global Code Ethics for Tourism, would provide a starting point for more robust legal frameworks for foreign tourism companies and emphasise sustainable development.

Does environmental regulation enhance firm's position in dual value chain? An analysis based on environmental information disclosure

Climbing the dual value chain (DVC) of parallel development in global and domestic value chains is an important channel to get rid of bottom solidification. Based on the data of international input-output tables after embedding provinces and decomposing value-added flow during 2003–2012, this article provides measurement for downstream or upstream embedding and division position indexes of A-listed firms. Then, theoretical framework of environmental regulation affecting DVC embeddedness is constructed, and the Environmental Information Disclosure (EID) trial implemented in 2008 is regarded as a quasi-natural experiment. The results show that EID enhances corporate division position in DVC by weakening downstream embeddedness and increasing upstream embeddedness, domestic firms are gradually transforming from low-end manufacturers to high-end designers. The effect works with a year lag in downstream embeddedness and lags 2 years in others. Heterogeneity analysis confirms that enhancement of division position is more sensitive in resource-rich cities with high marketization or labor-intensive firms and manufacturing or service sectors. Besides, we find that environmental regulation such as EID induces technological innovation for process upgrade, product improvement for quality upgrade and allocation optimization for function upgrade to transform the role and degree of firms embedding DVC.

How dual value chain embedding affects energy efficiency in China

Since the financial crisis, especially after the outbreak of COVID-19, the global trade division of labor has been changing rapidly. The global value chain (GVC) keeps shrinking while the domestic value chain (DVC) continues to develop. Therefore, it is important to re-examine the impact of different modes of value chain division of labor on China’s energy efficiency. In this study, we first constructed an input-output model of provinces embedded in the world to measure the dual embedding of domestic and global value chains. Then we used a three-dimensional fixed-effect model to study the impact and mechanism of dual value chain embedding on energy efficiency. We found that domestic value chain embedding inhibits energy efficiency improvement and global value chain embedding promotes energy efficiency improvement. A series of robustness and endogeneity tests support these findings. The heterogeneity tests revealed that the effects of dual value chain embedding on energy efficiency are more pronounced in low-polluting industries, high-tech industries, years before 2008, and coastal regions. The mechanism test revealed that DVC embedding inhibits energy efficiency by exacerbating the low-end lock-in effect, reducing environmental regulation and scale efficiency, and it increases energy efficiency by increasing technological progress efficiency. GVC embedding improves energy efficiency by weakening the low-end lock-in effect and increasing technical efficiency and scale efficiency, and it inhibits energy efficiency improvement by reducing environmental regulation and technological progress efficiency.

The economic impact of long-term care services

Abstract Projections show sharp increases in public spending on long-term care (LTC) services across Europe. However, a purely cost-based focus on LTC services is economically misleading. Private and public expenditure on LTC services directly and indirectly generates income in the form of salaries, taxes, and social security contributions. The aim of this paper is to quantify the economic impact and multipliers of LTC services for Austria. Based on an econometric regional Input-Output model for Austria, we estimate the direct, indirect, and induced effects of public and private expenditures on value added, employment, taxes, and social security contributions. According to our results, each euro spent on LTC services is associated with domestic value added of € 1.70; 70 cents per euro spent flows into public budgets in the form of taxes and social security contributions. The economic multipliers of the LTC services are comparatively high due to the high share of wages and salaries in direct expenditure and the associated high direct value added. Public expenditure on professional care services should therefore not be regarded merely as a cost factor in the public budget. Rather, this rapidly growing economic sector is also an increasingly important economic factor in a time of ageing societies. While the model does not provide information on the causal economic effect of the LTC sector, the findings are still highly important for planners of LTC reforms, as they provide information on the total value added associated with LTC expenditures and on the total number of jobs that these expenditures sustain.

The role of the One-Belt One-Road initiative in China?s exports and global value chains

Research background: China is regarded as the ?world factor? highly involved in international trade and plays an increasingly important role in the global value chains (GVC). Additionally, the ?One-Belt One-Road? (OBOR) initiative was proposed by the Chinese government to further promote China in the international market. Purpose of the article: The article explores the role of the OBOR in China?s exports and global value chain. It aims at: 1) verifying how OBOR impacts the volume of China's export and value-added export to its partners. 2) checking whether or not OBOR strengthens the industrial connection between China and its participants at the GVC level. 3) examining the different roles of corridors in China's exports and GVC. Methods: The empirical analysis is based on the augmented gravity model of international trade, which comprises China and its 197 partners in the period 2000?2018. The model is estimated for gross export as well GVC measured by domestic value added in export and the value contributed by a partner to China?s exports. Findings & value added: In general, there is a significant positive correlation between OBOR and the volumes of China?s export, domestic value-added trade and the value of partner?s contributed in China?s export. However, some of the results are blurred by OLS and FE methods. The author points out that FE-PPML estimation methods are more adequate. Among the six economic corridors, Bangladesh-China-India-Myanmar (BCIM), China-Pakistan (CP) and China Indochina Peninsula (CIP) were proven to play a prominent role in promoting China?s export, DVA and strengthening the links of global value chains. It is worth noting that the China-Mongolia-Russian Federation (CMRF) corridor harms China's export and DVA trade, and at the same time promotes countries in its region that benefit from trade with China.

Lithium Ion Battery Production in Nigeria: Issues and Challenges

The worldwide lithium battery market is expected to grow by a factor of 5 to 10 in the next decade. In response to this projected vast increase in market demand, the federal government in some advanced countries like the US, has outlined a national blueprint to guide investments in the urgent development of a domestic lithium-battery manufacturing value chain. The benefits derivable from these efforts include equitable clean-energy manufacturing jobs, a clean-energy economy and the mitigation of climate change impacts. This paper examines the Nigeria’s potentials for Lithium ion Battery development and the challenges stopping the country from tapping into these potentials and the benefits thereof. It focuses on current market factors that impact lithium ion battery development in Nigeria, evaluates market deterrents to widespread usage, and looked into possible scenarios on how the battery market in Nigeria could develop going forward. However, this growth will depend on strong supply chains, which rely on a secure and sustainable supply of raw minerals and metals most of which are in large supply in Nigeria but are grossly underutilized.

GLOBAL VALUE CHAINS: OPPORTUNITIES COME WITH CHALLENGES IN TUNISIA

Using data from the OECD-Trade in Value Added (TIVA) database, this paper analyzes Tunisia’s national and sectoral participation and positioning in global value chains (GVC) during 2005–2015. This paper also aims to illustrate countries with which Tunisia is highly integrated into GVC, by exploring the countries of origin of foreign value added in Tunisian exports, and the countries exporting Tunisian domestic value added share of its gross exports. Tunisia is among the most integrated countries, during the whole period of study. It has a high level of participation in GVC in many industrial activities, particularly in the textile, clothing and leather sector, food processing, and electronic and electrical equipment. The backward linkage in its GVC integration can be explained by the choice of specialization in its production, which roughly explains its position in the middle-stream–downstream. However, its participation in value chains remains regional rather than global. Around 60% of its GVC participation is with European countries. Overall, our results suggest that Tunisia has a potential that has been well exploited for the period 2005–2010 (period before the Tunisian revolution). However, this success remains limited since political and socio-economic crises have limited the potential of Tunisia’s current participation in the GVC.

Determinants of global value chain participation: cross-country analysis

This paper examines the factors that influence the four most common measures of global value chain participation, separately for the sample of countries included in the World Input–Output Database and Trade in Value-Added database. For both samples, country size is an important driver of global value chain indicators. Participation in global value chains varies by industry groups and their technological classification. The influence is strongest for high-tech manufacturing, followed by high-tech services. Real exchange rate has a significant positive relationship with the domestic value added in gross exports ratio and forward linkage. The findings on the other covariates are sample sensitive.

Microfoundations of global value chain research: Big decisions by small firms

In this study, we introduce a unique longitudinal dataset from the Italian Ministry of Economy and Finance Annual Survey (IMEFAS) to assess how micro and small enterprises (MSEs) partake in the global economy by tapping into global value chains (GVCs). The results of the empirical analysis show that the great majority of micro and small enterprises are unable to establish direct links with GVCs. However, two sub-categories of subcontractors and branded producers were able to accomplish upgrading and partake in GVCs after the 2008 economic crisis. For both groups of firms, strategies implemented in domestic value chains contributed to their future participation in GVCs. By identifying small firms’ value chain decisions associated with their ability to access GVCs directly, this study sheds light on the microfoundations of GVCs. It paves the way for the future intersection of small business economics and GVCs, two areas of research that have seldom talked to each other.

Prospective assessment of energy technologies: a comprehensive approach for sustainability assessment

BackgroundA further increase in renewable energy supply is needed to substitute fossil fuels and combat climate change. Each energy source and respective technologies have specific techno-economic and environmental characteristics as well as social implications. This paper presents a comprehensive approach for prospective sustainability assessment of energy technologies developed within the Helmholtz Initiative “Energy System 2050” (ES2050).MethodsThe “ES2050 approach” comprises environmental, economic, and social assessment. It includes established life cycle based economic and environmental indicators, and social indicators derived from a normative concept of sustainable development. The elaborated social indicators, i.e. patent growth rate, acceptance, and domestic value added, address three different socio-technical areas, i.e. innovation (patents), public perception (acceptance), and public welfare (value added).ResultsThe implementation of the “ES2050 approach” is presented exemplarily and different sustainability indicators and respective results are discussed based on three emerging technologies and corresponding case studies: (1) synthetic biofuels for mobility; (2) hydrogen from wind power for mobility; and (3) batteries for stationary energy storage. For synthetic biofuel, the environmental advantages over fossil gasoline are most apparent for the impact categories Climate Change and Ionizing Radiation—human health. Domestic value added accounts for 66% for synthetic biofuel compared to 13% for fossil gasoline. All hydrogen supply options can be considered to become near to economic competitiveness with fossil fuels in the long term. Survey participants regard Explosion Hazard as the most pressing concern about hydrogen fuel stations. For Li-ion batteries, the results for patent growth rate indicate that they enter their maturity phase.ConclusionsThe “ES2050 approach” enables a consistent prospective sustainability assessment of (emerging) energy technologies, supporting technology developers, decision-makers in politics, industry, and society with knowledge for further evaluation, steering, and governance. The approach presented is considered rather a starting point than a blueprint for the comprehensive assessment of renewable energy technologies though, especially for the suggested social indicators, their significance and their embedding in context scenarios for prospective assessments.

Attribute Implications and Reverberations of the Japanese Foreign Policy for Technology and Innovation Business in Thailand

Economic growth can be defined by real gross domestic value and international imports and exports supported by technology and innovation. Currently, there are concerns about the level of international technological policy investment, despite having the capability to be macroeconomically and business-valuable. The main objective of this research is to study the attributions in relationships and associations between the policy implications of technological business (PITB) and the effort of technology and innovation acceptance capacity (TIAC), which influence capacity development and foresight to ensure effective Japanese foreign policies. This research has been fully justified through business policy receiving technology and innovation, the potential for technology and innovation adoption (PTIA) and innovation for firm performance (IFP) of Japanese joint venture companies in Thailand was examined. Fifty-seven companies were subjected to the structural equation model testing method. Data collection was conducted by the questionnaire and an in-depth interview with validity and reliability checked under 4 main latent variables: PITB, TIAC, PTIA, and IFP. All processing was performed with the ADANCO 2.2.1 program. The research found that PITB had a positive correlation and directly influenced PTIA and IFP unless it had an inverse correlation to TIAC and the relationship between TIAC and PTIA. It can serve as a guide for how to correctly carry out the principle of creating a new Japan's foreign policy in the future. Doi: 10.28991/ESJ-2022-06-03-09 Full Text: PDF

Does green growth foster green policies? Value chain upgrading and feedback mechanisms on renewable energy policies

The expansion of renewable energies not only lowers carbon emissions, it also redistributes resources among actors. This article argues that green industrialization – specifically, manufacturing and the development of renewable energy technologies — creates economic gains that impact political processes and increase renewable energy policy ambition. Building on a combined framework of policy feedback and global value chain literature, we see domestic value creation as a key determinant of coalition strength and learning effects for policymakers. We analyze the relationship of value chain involvement to policy ambition using panel data on countries’ manufacturing and innovation activities in the wind and solar industry from 2010 to 2018. The results show a positive technology policy feedback mechanism, implying that higher local value creation leads to more ambitious renewable energy policies. These first large-N findings support previous case studies on the importance of green growth for raising policy ambition; it implies that transformative policies fostering value creation could create a virtuous cycle for policy ambition. We further propose an interdisciplinary research agenda to shed light on the role of value chain dynamics for policy feedback mechanisms across different political economies.

Intangible ICT and Their Importance within Global Value Chains: An Empirical Analysis Based on Longitudinal Data Regression

The rising global importance of global value chains was enabled by developing information and communication technologies, ICT. A correct understanding of ICT roles determines a country’s global competitiveness. The study aims to examine the role of intangible ICT assets in creating domestic and foreign value added in export. Based on a sample of available longitudinal data from the EU-KLEMS database, for the period 2000–2015, 10 EU countries have been selected and analysed. We applied several panel regression models to confirm the important role of ICT capital, specific to intangible ICT, in creating domestic added value in exports and participation in the global value chains. Our results show that intangible ICT assets have a higher impact on the global value chain participation than tangible ICT assets. Moreover, the analysis at the sectoral level reveals a stronger effect of total ICT assets in the case of total business sectors.

Services in Global Value Chains – An Insight into the Current Situation in the EU Member States

Global value chains (GVCs) consist of many production processes and phases/tasks that take place in different countries. The studies of the global value chains are mainly focused on manufactured products, often neglecting the role of services. In this paper, the emphasis is on the service sector, trade in services and the measurement of their participation in GVCs in the EU member states. There are four different ways, "modes of supply", to deliver services from a producer to the final customer. Official statistics include some of these modes, whereas some are hidden within the manufacturing process. According to the descriptive statistics analysis and presented data employed, it is clear that services trade is undervalued; services represent the majority of value added in the EU's GDP, but less than half of foreign trade; domestic value added in the service sector is higher than in manufacturing, which indicates the importance of domestic resources in the creation and export of services. EU industries are highly serviced and, interestingly, services contribute to more than 30 per cent of manufacturing production, with a higher share of foreign services.

Employment effects of joining global production networks: Does domestic value added matter?

AbstractIs the emphasis placed on domestic value added in trade and industry policy‐making in developing countries consistent with the objective of employment generation through an export‐oriented development strategy? This paper examines the rationale behind this policy emphasis by first revisiting the conventional case for using the value‐added ratio as policy guidance and then undertaking an input–output analysis of the manufacturing industry in Thailand with emphasis on domestic employment generation. The analysis is based on a panel data set covering 74 manufacturing sectors from 1990 to 2015. The findings do not support the widely shared view that industries with a high value‐added ratio have greater potential to create domestic export‐induced employment. The policy implication of the results is that, in this era of economic globalization driven by global production networks, national industry policy needs to be guided by the market potential of products.

ORGANIZATIONAL FORMS OF INTEGRATION OF AGRICULTURAL MARKETS TO GLOBAL VALUE CHAINS

Topicality. In Ukraine, there are opportunities for integration into global value chains, primarily in the agri-food markets. Concentration of these strategic resources in the structural units of agri-food enterprises in all segments of the global market with the formation of dynamic competitive advantages of national economies of their countries. This process is facilitated by the availability of developed transport infrastructure, especially sea and river ports, attracting investment, including foreign in increasing crop production, productive land, increased role of the state in regulating strategic agri-food markets. At the same time, this powerful potential is not used effectively. Significant losses are due in particular to the creation of logistics of export flows, which in many cases make domestic food products uncompetitive in foreign markets, due to inflated costs of supply to final consumers. Such inflated costs indicate the lack of coordinated interaction of export-oriented chains and organizational and economic mechanisms, their regulation. Aim and tasks. The purpose of the study is to substantiate the scientific provisions and organizational and economic forms of logistics support for the integration of agri-food markets into global value chains. Research results. The current methodological approaches to the analysis of global value chains are analyzed, it is established that the main analytical indicator for agri-food markets and their individual sectors is a two-component "index of participation in global value chains". Low rates of participation of commodity markets in global chains are characteristic of developing countries and exporting countries of commodities with low levels of domestic value added, as evidenced by the sectoral analysis of agricultural markets. Analysis of problems with the efficiency of global agri-food value chains and specific market participants, practice shows that the producer achieves the greatest economic effect when it sells not raw materials, but products of processing, with increased value. In particular, the urgency of this issue is exacerbated by the need to use logistical reserves in the process of servicing export flows. Recent data suggest that as countries participate in global value chains, commodity growth rates increase. Value chains play an important role as a source of job creation. Thus, trade and supply in food hubs within the logistics chains of food markets stimulates the development of logistics as a critical component of global chains, as the most important problem is to supply products in the right quantity, quality, on time. The study also focuses on general market factors that affect the efficiency of specific value chains in the external dimension. Conclusion. The study proposes a conceptual approach to integrating agri-food markets into global value chains by creating agri-food hubs. The peculiarity of this concept is the formation of networks of specialized hubs that should serve the commodity flows of related markets. The basis of agri-food hubs should be formed by logistics functions related to marketing activities, tools for end-to-end planning of commodity supplies, and their institutional support. This will ensure efficient logistics routes of goods supply, strengthen cooperation between the links of the chains, fully take into account the specifics of the requirements of foreign consumer markets. Prospects for further research on this issue include bringing the rules of tax and customs legislation in line with international standards, ensuring insurance of export contracts and more.

VAT compliance, trade, and institutions

We develop a simple model of value added tax (VAT) compliance, and estimate it using widely available national accounts data to learn about compliance in countries where little is currently known. International border controls improve VAT compliance, generating a correlation between imports and aggregate VAT revenues that is informative about domestic non-compliance. We estimate nearly 30 percent of domestic value added escapes taxation through non-compliance for the average country in our sample, with much higher levels of non-compliance in countries with low perceived institutional quality. We analyze how our estimates are related to institutional differences among countries, and discuss the implications for tax policy.

Air pollution and the domestic value-added for Chinese exporters

This paper evaluates the causal effect of air pollution on the share of domestic value-added in exports for Chinese exporters. Precipitation is employed as an instrument for air pollution to alleviate the endogeneity. Our baseline instrument variable estimation identifies a significant and negative effect of air pollution on the share of domestic value added in exports. Specifically, each 1 mg/m 3 increase in yearly PM 2.5 exposure is associated with 3.144 7 units decrease of the domestic value-added rate of firms’ exports.This result holds when wind speed,air flow index and thermal inversions are used as alternative instruments. Further, it is shown that air pollution is detrimental to the health of employees, and also has negative effect on firms’ productivity as well as firms’innovation capacity. All of these may have a negative effect on domestic production and therefore reduce the share of value added done domestically. Lastly, greater effect is found for the central region, the east of Hu Huanyong line, cities of low altitude and high pressure, and also for foreign-invested firms. This paper provides empirical evidence that air pollution may affect the organization of global production, i.e., the share of domestic value added in Chinese exports, and it certainly contributes to more comprehensive understanding of the effect of air pollution.

China's domestic production networks

This paper examines China's domestic production networks. It uses VAT invoices to build inter-provincial input-output tables for 2002 and 2012. These are combined with population censuses to determine the location of workers involved in production. We document i) increased trade in intermediate inputs between provinces; ii) inter-provincial production fragmentation that differs by product; iii) substitution of domestic for foreign intermediates, resulting in increased domestic value added in exports. Information about the occupations of workers suggest that iv) richer coastal areas such as Beijing, Tianjin, and Shanghai specialize in R&D and marketing activities, whereas v) inland provinces specialize in production activities.