Forward Linkages Research Articles

Determinants of product sophistication in Vietnam: findings from the firm–multi-product level microdata approach

ABSTRACT By using data from the Vietnam Enterprise Survey and applying the fixed effect model, this study investigates the determinants of product sophistication at the firm – multi-product level in Vietnam-a transitional economy – over 2010–2016. Estimations show that horizontal foreign direct investment (FDI) spillovers have a negative effect on product sophistication. We find a positive contribution of forward spillovers and a negative contribution of backward linkages. An interaction term between forward spillover and productivity has a negative effect but is insignificant. Estimated outcomes also indicate that the average amount of labour, revenue, productivity, technology level, and capital to labour ratio of firms has advantageous impacts on product sophistication. Our results are robust using different measurements of product sophistication. This article suggests that strengthening forward linkages by facilitating the supply of intermediate inputs from multinational firms and improving productivity, capital-to-labour ratio, and governance capability could help Vietnamese firms produce more sophisticated goods.

The Potential Impact of Tariff Liberalisation on India’s Automobile Industry Global Value Chain Trade: Evidence From an Economy-Wide Model

The impact of tariff barriers affecting participation in global value chain (GVC) trade has received attention in recent literature. However, the empirical evidence in the context of mega-regional trade agreements, such as the Regional Comprehensive Economic Partnership (RCEP), from which India opted out recently, remains non-existent. Our study contributes to the empirical literature by undertaking an economy-wide modelling exercise, augmenting it to the automobile sector trade in GVC goods in the Indian context. We conduct two policy simulations with an aim to analyse how India’s auto-industry and auto-parts trade, involving forward and backward linkages in GVCs, have been affected by its decision to opt out of RCEP compared to a hypothetical scenario of not doing so. Our results suggest that a potential RCEP membership would have created net trade in both the finished automobile and intermediate auto-parts sectors, although imports would exceed exports. Further, we infer that both backward linkages and forward linkages in this industry will be adversely affected by opting out of RCEP, as there is export diversion in the auto-parts sectors globally, with India facing terms of trade losses due to higher import prices. This informs policymakers that developing domestic resilience and improving productivity are critical for India to improve its long-run export competitiveness while contemplating future trade agreements, including those with RCEP members. JEL Codes: F15, F61, O53

Estimating the Importance of Civil Construction for the Brazilian Economy Through Hypothetical Extraction of the Input-Output Matrix

This paper aims to undertake a systemic analysis of civil construction to verify whether public investments made from 2007 onwards were able to increase the sector's productive linkages in the Brazilian economy. For this, the hypothetical extraction method of the input-output matrix and the official matrices of the country from 2005 and 2015 are used. The results show that the importance of the productive structure of the construction sector - total extraction - exceeds 7.42% of GDP in 2005 to 10.06% in 2015. This fact reveals that the civil construction sector in 2005 was the seventh most important moving to the fourth in 2015 in a total of twelve sectors considered. Another important finding lies in the fact that despite the construction sector presenting an increase in the complexity of its productive structure, it showed strong backward linkage, but low forward linkage, in both analyzed periods. Through these results, it is possible to conclude that the tax exemption of some inputs, reduction of real estate interest, expansion of credit for housing through public housing and infrastructure policies may have been essential for the increase in the complexity of the sector's productive chains between the years' from 2005 and 2015. Such findings are useful for the scientific literature that investigates the sector by bringing evidence to Brazil and to policymakers given that possibly the construction sector can be used as a strategy to promote and stimulate economic activity in times of crisis.

From nickel to Electric cars? Indonesia’s resource cum automotive industry policy

This paper elucidates Indonesia’s resource-cum-industrial policy to leverage domestic nickel resources for building a localised value chain from mining to electric vehicles. The value chain is first mapped in order to facilitate the policy analysis. While Indonesia is successful in attracting investment projects which aim to build the value chain from mining to electric vehicle batteries within her borders, our analysis nevertheless finds that this process must be rather attributed to value chain lead firm strategy than Indonesian resource policy. Further, the final stage of electric vehicle assembly is only sparsely developed, suggesting that the attempted integration of forward linkage creation from mining and simultaneous backward linkage creation from vehicle assembly is not systematically deployed.

The Fruit and Vegetable Sector in Andalusia (Spain): Key in Terms of Linkages and the Effect of Economic Multipliers?

The agriculture, livestock, forestry, and fishing sectors are very important in Andalusia (Spain), being strongly focused on foreign markets, which has required them to make great efforts to improve their competitiveness. The aim of this work is to understand the interrelationships between the fruit and vegetables sector and the remaining sectors of the Andalusian economy, as well as knowing its multiplying effects on production, income, and employment. To this end, the input-output tables of Andalusia for 2016 will be used in order to know if it is a key sector and how it can help to establish economic policy objectives. Regarding forward linkages, the branches that most demand fruit and vegetable products are the industries related to other food products, and the preparation of canned fish and vegetables. In relation to backward linkages, they focus on the manufacture of basic chemicals, and other agricultural crops and services. Despite its importance in Andalusian agriculture, the fruit and vegetable sector is not considered a key sector according to the Rasmussen coefficients, as it is classified as an independent industry. The reasons may be that it uses few primary inputs, is poorly integrated with the rest of the productive sectors, and its production is destined to satisfy final demand (national and international). However, it generates an above average impact on the economy in most multipliers, being important for stimulating economic policy measures.

The Effects of Global Value Chain on Export Survival

This article uses panel data with 6,743 country-year observations to investigate the effects of participation in the global value chain (GVC) on export survival rate for the period 2005–2014. GVC participation is measured as the value addition embedded in exports, looking both backward and forward from a reference country. The empirical results show that both backward and forward linkages have positive effects on the chance of export survival; these effects are persistent and increasing over time, and they become more pronounced when taking the endogeneity issue into account. On the policy front, the preceding findings suggest that governments should implement policies to upgrade a country to GVC integration in order to enhance the sustainability of exports. JEL Codes: F10, F14, C41

The Role of the Forest Recreation Industry in China’s National Economy: An Input–Output Analysis

Forest recreation not only enables directly creates impacts on the entire tourism industry but also indirectly creates effects on other industries composed in an economic system via inter-industrial interdependence, such as backward and forward linkages or interactions. However, due to the lack of data available, few studies have been made exclusively for evaluating the impacts of forest recreation on the economy in a national dimension. Therefore, this paper attempts to analyze the economic impacts of the forest recreation industry. Using an input–output modeling approach, the industrial linkage and a cluster of economic multipliers are estimated based on new input–output tables for 2012, 2017, and 2018 that includes the forest recreation industry. The results indicate that, first, both the forward and backward linkages caused by forest recreation show rising trends over the analysis periods and the backward linkages are stronger than forward linkages. Second, the economic contribution of forest recreation has been strengthened, although the multipliers have shown a downward trend. The total output impact in 2018 is calculated to be $838.187 billion, with a total added impact of $352.713 billion. Furthermore, forest recreation could create over 18 million jobs with an average annual growth rate of 15.73%, which are mainly in the catering, accommodation, and retail industries with low skill requirements. Finally, policy applications are proposed to provide reliable and useful information for future planning and investment decision associated with the forestry and ecotourism industry.

Applying the hypothetical extraction method to investigate the interindustry greenhouse gas emissions linkages in the Greek economy

ABSTRACT This paper examines the interindustry greenhouse gas (GHG) emissions linkages within the Greek economy for the year 2018, using a symmetric I-O table and air emissions accounts data. The GHG linkages among industries are analyzed both from a demand and supply perspective by applying an environmental modification of the Dietzenbacher and van der Linden’s Hypothetical Extraction Method (1997), as introduced and discussed in Tsirimokos (2022). The findings reveal that: (i) the ‘Electricity, gas, steam, and air conditioning supply’ industry exhibits the highest total absolute backward and forward linkages; (ii) the ‘Real estate activities’ industry demonstrates the highest relative backward and forward linkages; (iii) industries with low (high) relative linkages generally, exhibit high (low) internal linkages; and (iv) the ‘Electricity, gas, steam, and air conditioning supply’ and ‘Transportation and storage’ industries are the primary GHG emissions contributors within the Greek economy. These empirical results can inform the development of effective environmental policies, supporting Greece in achieving its climate action plan objectives.

FDI and Firm Productivity: A Comprehensive Review of Macroeconomic and Microeconomic Models

This paper reviews the literature on foreign direct investment (FDI), productivity, and technology upgrading, with a focus on macroeconomic and microeconomic models. It compares the performance of various models used to study FDI and its effects on firms’ productivity, via skill and technology upgrading, offshoring, institutional quality, and other related factors. This review highlights the differences and similarities between macroeconomic and microeconomic models, their empirical strategies, and their ability to provide a comprehensive understanding of the mechanisms through which FDI affects productivity and other variables. The empirical literature on the impact of FDI on the productivity of local firms is derived from association studies, which use a neoclassic production function and an augmented Solow-type equation. These models have been shown to be inadequate in capturing the dynamic and complex nature of FDI and the associated externalities, particularly vertical externalities. This paper identifies three criticisms of the literature on pecuniary externalities, including a lack of models that focus specifically on the mechanism of forward linkages, inadequate measures to assess linkage effects, and the failure to include crucial determinant factors in empirical models. Overall, this paper calls for more comprehensive and nuanced models that incorporate the dynamic and complex nature of FDI and its externalities.

Charting China’s Export Trajectories: Energy Factors and the Evolution of Competitive Advantage in Relation to the U.S.

Accompanied with energy price fluctuating frequently, energy-saving technology updating rapidly, energy factor plays an important role in China’s export trade to US via energy relative price and energy consumption technology differentiation. According to industry energy consumption density, the paper classifies industries into high and low energy consumption industry, combining Costinot et al. productivity method with forward linkages increase export value added, calculates Chinese high and low energy consumption industries export comparative advantage index to US during 2000-2014, as well as using Kernel density method to evaluate the transition of them, finds that comparative advantage of China’s high/low energy consumption industry to U.S. has a trend of weaken/strength which shows extreme phenomena. furtherly, utilizing Probit method to estimate the factors which affects the comparative advantage, the results turn out that the gap of energy consumption technology between two countries is the main reason which contributes to China’s comparative advantage of both high and low energy consumption industry to U.S. The energy relative price just has significant impact on high energy consumption industry, which will affect the achievement of China’s carbon emission reduction targets in ‘Responding to Climate Change: China’s Policies and Actions’.

Members’ Intention to Participate in Farmer Producer Company Activities in Cauvery Delta Region of Tamil Nadu

Farmer Producer Company(FPC) is one of the tools to tackle the demand-driven market and march towards the development of deprived small and marginal farmers. Members’ active participation in FPC activities is essential to resolve backward and forward linkage issues. Members could easily access speciality markets and obtain better price for agricultural products in the conventional sector, if they consistently participate in FPC activities. The present study applied the Theory of Planned Behaviour (TPB) to examine the intention of members to participate in FPC activities. The moderating role of landholdings on the relationship between various TPB factors and farmers' intentions to participate in FPC activities was also studied. The study relied on primary data collected from 382 members from the Cauvery Delta Region of Tamil Nadu using a proportionate random sampling technique. The PLS-SEM results revealed that attitudes, subjective norms, and perceived behavioural control have a significant positive influence on the participation of the members in FPC activities. There is a significant moderating effect of landholding on the relationship between TPB factors and participation intention. The study has put forward the major implication for improving the participation of members in FPC activities.

Tracking the Van: The role of forward linkages in logistics MNEs' location choices across European NUTS 3 regions

AbstractLogistics firms play a crucial role in overcoming time and distance constraints in supply chain management. However, little is known about their location patterns. This paper fills the gap by studying the logistics of multi‐national enterprises' location choices across 380 NUTS 3. Using data on 1777 foreign direct investments (FDIs), our findings reveal that forward linkages with a region's retail and wholesale industry exert a stronger impact than intermediate production demand. Results are robust to the inclusion of standard FDIs' determinants and to controls for spatial dependence. Findings suggest that intersectoral demand from downstream sectors positively affect logistics operators independently from the manufacturing base.

Monetary Policy Shocks and Input–Output Characteristics of Production Networks

This paper revisits the production network’s role in transmitting monetary policy shocks. The study uses macroeconomic data for multiple OECD economies, for which it estimates the time-varying impulse response functions of GDP to monetary shocks. In contrast to recent macroeconomics papers focusing on upstreamness or downstreamness, the paper studies measures from the input–output literature, like average propagation length or fields of influence. When looking at the relationship between the production network measures and the impact of monetary policy shocks on GDP, measures like average propagation length or rows’ fields of influence, amplify the negative impact of the monetary policy shocks, while the forward linkage dampens them.

Child labour and global value chains

AbstractWe explore the relationship between the internationalisation of production through Global Value Chains and child labour at the sector level, using data from 26 low‐ and middle‐income countries. We find that sectors with stronger participation in foreign markets by exporting inputs to firms that will process them and export them to third countries (forward linkages) exhibit less child labour. However, other forms of participation in foreign markets through gross exports or exports of goods that embed foreign value‐added (backward linkages) are not associated with lower levels of child labour.

러시아 금융산업의 경제기여도 변화

After the outbreak of the Russia-Ukraine War in February 2022, Russia was effectively cut off from the global financial system by being kicked out of the SWIFT payment network. Consequently, the development of the financial market has become an urgent task for Russia. In this paper, an inter-industry analysis was conducted for countries in transition, such as Russia, the Czech Republic, 경Poland, and Kazakhstan, using input-output tables from 1999 to 2018 provided by the OECD. According to the research findings, the financial industries of the four countries showed relatively high forward linkage effects and low backward linkage effects. In other words, they are categorized as intermediate-demand primitive industries. In addition, the Russian financial industry was found to have the following characteristics. First, it does not yet account for a large portion of the national economy and has experienced ups and downs due to economic fluctuations, but is growing relatively steadily. Second, although the financial industry is not a core industry in the Russian economy, it is of great importance because of its relatively high-added value and production support effect of other industries. Third, given the growing support effect of other industries, it is likely that the higher productivity and efficiency in the financial market will contribute to the competitiveness of other industries. This suggests the need to increase the proportion of the Russian financial industry in the national economy. In this context, the policy for the efficient development of the financial market implemented by the Russian government appears to be desirable. In particular, if the efficiency of the financial sector is improved and costs are reduced through the development of fintech, it will contribute more to the growth of other industries and the national economy.

All the loners mingle — Where do they all come from and belong? Regulating sectoral emissions and carbon markets in Brazil

To comply with emissions targets pledged in their NDCs (Nationally Determined Contributions) to the Paris Agreement, several countries have opted for incentive-based instruments. Brazil sits among them, which prefer carbon markets over taxation to control emissions, on the one hand, while keeping the stimulus to economic development, on the other. Therefore, the country has just enacted its legal framework allowing its economic sectors for trading carbon credits and thus reducing emissions. However, one elementary yet puzzling question in the design of carbon markets is the selection of the sectors to be regulated. Too many of them turn the system costly and unwieldy; too few undermine compliance with the emissions target. Drawing on the linkage hypothesis, backward (BL) and forward (FL) linkage indices offer a rational criterion to guide sectors' regulation. These indices respectively rely on the relative importance (dependence) of each sector and utilisation of the (by-)product they supply. Applied to the latest (2018) Brazil's input-output table available, the analysis carried out here found that the sectoral scope of the country's actual regulatory provisions is either too narrow or too wide and leaves out important key sectors in the Brazilian economy.

Linkages between Sectors and Regions in the Aceh Economy

This study analyzes the economy of Aceh not only based on the linkage between industries but also based on the linkage between regions. The analysis used forward linkages and backward links to determine the leading sectors in Aceh. The data used is secondary data from Indonesia's 2016 Inter-Regional Input Output (IRIO) based on domestic transactions at producer prices. The data is sourced from Statistics Indonesia. The study results show that the key sectors in Aceh are Electricity and Gas and Manufacturing. These sectors have the highest spreading power (backward linkage) and sensitivity (forward linkage) because they are in the first quadrant. In addition, inter-regional linkage analysis shows that the final demand shock in Aceh has a large output impact on DKI Jakarta, North Sumatera, and Riau. On the other hand, the economy of Aceh was affected by the final demand shock from several provinces on the island of Sumatra, namely North Sumatera, Bengkulu, West Sumatera, Jambi, and Sumatra Selatan. The policy implications that can be applied to increase labor skills and management in leading sectors will have a multiplier effect on other sectors and the cooperation between provinces in a special economic zone.

Critical Analysis of Backward and Forward Linkages in Cotton Cultivation

Backward and forward linkages will help cotton growers to plan their farm activities in advance from production to post production activities and gain information about inter-sectoral linkages operating in cotton cultivation.Understanding the significance of backward and forward linkages in the contemporary scenario, an attempt was made to find out the activity wise backward and forward linkages followed by cotton growers in cotton cultivation. Based on maximum area under cotton cultivation Kurnool and Guntur districts from the state of Andhra Pradesh were purposively selected. An ex-post facto research design was used for the study and the data were collected using pre-structured interview schedule from 240 respondents through multi-stages ampling. The results showed that, with respect to backward linkages more than half (58.33%) of the farmers were having moderate/medium backward linkages with various agencies followed by 21.25 per cent were having low and remaining 20.41 per cent were having high level of backward linkages with various agencies. With respect to forward linkages nearly half (49.58%) of the farmers were having forward linkages with various agencies followed by 30.41 per cent were having low and rest onefifth (20.00%) were having high backward linkages with various agencies.These findings draw attention of researchers, policy makers and other stakeholders for the introduction of innovative methods in better indulgent of backward and forward linkages in cotton cultivation.

Determinants of Performance and Constraints Faced by Farmer Producer Organizations (FPOs) in India

Farmer Producer Organization (FPO) is believed to improve the livelihood of farmers by collectivizing them for input purchase and providing forward linkage. In order to understand the determinants of performance and the constraints faced by them, the study was undertaken by surveying 125 FPOs of Andhra Pradesh, Madhya Pradesh, Telangana, Maharashtra and Uttar Pradesh during April-August 2022. It was found that most of the FPOs are engaged in input supply followed by produce aggregation. The FPOs with more number of enterprising activities were able to achieve higher turnover and better net profit. Multiple regression was used to identify the determinants of paid-up capital and turnover of FPO. Members number, BOD size and years of existence were found to be the determinants of paid-up capital of FPO. Paid-up capital was found to be significant predictor of turnover of FPO. Capital requirement was found to be the biggest constraint faced by FPO in achieving better performance. It was concluded that for increasing the turnover, the FPO should focus on increasing the paid-up capital as paid-up capital can be used for scaling up and expanding the business. Extending capital loan as well as working capital loan to FPO should be made easy.

Factors Affecting Potato Marketed Surplus in Kavre District of Nepal

Potato is a staple food crop. It has been being a highly consumed food grown in all parts of Nepal. A study was conducted to identify the factors affecting the potato marketed surplus, taking randomly selected 100 potato growing households in Kavre district of Nepal. Face to face survey with semi structured questionnaire for primary data collection and secondary information was collected through review of relevant publications from the government authority. Descriptive statistics and econometric model were used for data analysis. The multiple linear regression model was used to identify the determinants of potato marketed surplus. It was revealed around 81% of the total potato production was usually sold to the market and the remaining 11% and 9% of potato were used for seed and home consumption respectively. The multiple regression model indicates that among the seven variables used namely area of potato production, NARC released potato varieties, experience of farmer, education level, price and selling to traders were significantly influenced to the marketed surplus of potato in Kavre. Farmers’ access to quality inputs services and capacity building training for enhanced production and strengthening backward and forward linkage for effective marketing.