Position In Global Value Chains Research Articles

Changes in global trade patterns increase global inequality towards Sustainable Development Goals

Reaching the UN's sustainable development goals (SDGs) is influenced by a country's position in global value chains and its involvement in international trade. Here, we assess how changes in global trade patterns (CGTP) during 2004 and 2014 impacted 13 SDG indicators in 141 countries/regions which are further divided into four income groups. Trade pattern is characterized by the direction, composition, and magnitude of trade, indicating an economy imports what types (composition) and magnitudes of goods or services from where (direction). We find that CGTP aggravated socioeconomic and environmental inequality between countries in two ways: 1) the amount of indicators that significantly worsened due to CGTP decreased from 8 indicators (2004–2007) to 1 (2011–2014) for high-income and upper-middle-income countries, but increased from 5 to 14 for lower-middle-income and low-income countries; 2) CGTP led to a coupling of value added with most natural resource consumption and environmental pollution indicators for low-income countries, while they strengthened decoupling or reducing coupling for other countries. The findings imply one key to achieving SDGs is to address the inequality between rich and poor countries through implementing policy interventions that influence import and vertical supply chain thereby shifting the trade patterns towards environmental-economic decoupling in poor countries.

Does global value chain participation and position lead to innovation in an emerging economy? Industry-level evidence from Indian manufacturing industries

This study examines the relationship between global value chain (GVC) embeddedness (participation and position) and innovation performance in India using data from the TiVA database for 14 manufacturing industries over the period 2009–2018. To account for the endogeneity issue arising due to reverse causality, the study employs a two-step system GMM. Empirical results show that GVC participation and position both significantly positively affect innovation performance, measured by the number of patent applications filed. However, participation has an inverted U-shaped impact. We contribute to the existing literature by further splitting GVC participation into forward and backward participations and finding that only forward GVC participation significantly impacts an emerging country’s innovation performance. These findings suggest that policymakers in emerging countries should prioritize improving GVC position through increased R&D expenditures rather than relying solely on excessive GVC participation for enhancing innovation.

The Impact of Trade Credit on Global Value Chain Position: Evidence from Chinese Manufacturing Firms

ABSTRACT Conventional wisdom argues that a well functioning financial system is essential to foster economic growth and development. While its financial market is still underdeveloped, China has not only achieved great economic growth and speedy export growth, but also elevated its position as an exporter in the global value chain (GVC). This paper examines the impact of trade credit on the GVC positions of Chinese manufacturing enterprises. The empirical study finds that trade credit has a significant promotional effect on enterprises’ GVC positions, and the effect is more pronounced for private firms, firms with high market position, and firms in high-technology industries. The mechanism analysis shows that trade credit heightens the export quality of products and alleviates the financing constraints of enterprises, thus promoting their GVC positions. The findings have implications for Chinese manufacturing firms to exploit the role of trade credit in promoting their GVC positions and fostering new advantages in international competition.

How Does Economic Policy Uncertainty Impact a Country's Position in Global Value Chains?

AbstractEconomic globalization in the 21st century has been characterized by the rise and spread of global value chains (GVCs). It faces significant challenges due to increasing domestic and international policy uncertainty in the context of emerging mega risks like geopolitical tensions and climate change. This paper begins by constructing a theoretical model for an open economy to study how risk‐averse firms make decisions regarding the sourcing of intermediate inputs in an uncertain environment. Our model solution proposes that firms will source fewer intermediate inputs from countries with more economic uncertainty. An increase in domestic and foreign uncertainty will have opposite impacts on a country's position in GVCs. In this sense, we argue that a country tends to move downstream along GVCs if its own economic policies become more uncertain, and it tends to move upstream with an increase in the uncertainty of its trading partner countries. Our regression analyses, based on data including the World Input–Output Database, World Development Indicators, the UN Comtrade database, and the Economic Policy Uncertainty Index, provide empirical support for this model‐based conclusion. Our findings highlight that a nation must consider foreign economic policy uncertainty and maintain domestic policy stability to participate in GVCs.

Bilateral tax treaties network and global value chain position

This study investigates the effect of bilateral tax treaty (BTT) network centrality on countries’ global value chain (GVC) positions using a panel dataset of 62 economies from 2007 to 2021. Employing an instrumental variable approach, we find that higher BTT network centrality reduces a country's overall GVC position, with heterogeneous effects across sectors and participation types (forward and backward). The results suggest that increased BTT network centrality may facilitate production fragmentation and enable tax planning strategies (treaty shopping), leading to a distortion in the distribution of value-added across countries in GVCs.

Export Diversification, Quality and Global Value Chain: A Cross-country Analysis

This paper critically examines the impact of countries’ participation and positions in Global Value Chains (GVCs) on their export diversification and quality for 43 G20 and OECD countries over the period 1990–2015. GMM dynamic panel estimation reveals that deeper GVC integration significantly influences export structures, with countries positioned downstream in the value chain exhibiting more diversified exports (overall and at the intensive margin) but have concentrated exports at the extensive margin and geographically. Conversely, upstream, more factor-based GVC activities tend to result in less diversified export portfolios. Greater GVC participation leads to a more diversified export product basket but more concentrated export destinations in terms of the Hirschman index. However, the association between export diversification and GVC participation varies across measures of diversification and country’s level of economic development. We further find that countries and sectors having larger export share in downstream of the supply chain and have a lower extent of GVC participation, export quality differentiated product. These outcomes suggest that GVC participation and position play crucial roles in shaping national export strategies and economic resilience, with downstream activities offering pathways to enhanced export diversification and quality improvement. The study contributes to the understanding of how global production fragmentation impacts the complexity and sophistication of countries’ export baskets. The outcomes provide guidance for policymakers to strategically leverage GVC engagement to foster export diversification, quality improvement and economic resilience.

Global value chains and their impact on Ukraine’s agro-industrial complex

In the contemporary global economic environment, integration into global value chains is a crucial factor for a country’s economic growth. The aim of this research was to determine the impact of Ukraine’s participation in global value chains on the country’s agro-industrial complex. The study employed statistical analysis, regression analysis, econometric modelling, correlation analysis, and analysis of indices of a country’s participation and position in global value chains. It was established that during 2010-2011, the Ukrainian economy demonstrated high growth rates of gross domestic product and exports due to the growth of foreign value-added. Starting in 2012, growth rates began to decline due to economic crises, political instability, and the war that began in 2014. The COVID-19 pandemic also had a negative impact on the economic situation in 2020. Despite the full-scale war in 2022, a slow economic recovery was observed in 2023, driven by an increase in foreign gross value-added in exports. Regression analysis showed a strong correlation between Ukraine’s gross domestic product and indicators of foreign investment in exports and total exports. It was found that an increase in foreign gross value-added in exports has a negative impact on gross domestic product, while an increase in total exports has a positive impact on economic growth. Despite the complexity of the global value chain system, the results indicate Ukraine’s potential for further integration into global economic processes. It has been found that the agricultural sector is also affected by fluctuations in foreign gross value-added, which is reflected in the productivity and export capabilities of the agricultural sector. An analysis of the participation of key industries, including the agro-industrial complex, in GVCparticipation has shown a trend towards a decrease in the share of foreign value-added in the gross export of industrial products, indicating an increase in domestic value-added. The research results can be used to develop an effective strategy for Ukraine’s economic development by optimising participation in global value chains and reducing dependence on foreign value-added in exports

Bond market liberalization, technological innovation and firms' position in the global value chain division of labor

Based on the annual data of Chinese listed enterprises from 2004 to 2016, this paper investigates the impact of the opening up of the bond market on the division of labor position of enterprises' global value chains. It is found that the opening up of bond market mainly enhances the division of labor position of enterprises' global value chain by influencing the level of enterprises' technological innovation. The results of mechanism test show that the opening of bond market to the outside world can help enterprises to increase R&D investment, improve technological innovation level and realize the upgrading of the division of labor position in global value chain by alleviating the financing constraints of enterprises and intensifying the competition among enterprises. Heterogeneity analysis shows that the opening up of bond market has a better effect on the GVC status of enterprises in the central and western regions than that of enterprises in the eastern regions.

Investigation of the causality between participation in global value chains and CO2 emissions between developed and developing countries

The production and consumption activities are cross-border and therefore, it is important to understand the role of Global Value Chains (GVCs) in fulfilling a country’s specific climate commitments. This study examines the causal relationship between selected GVC indices and CO2 emissions. We use the GVC position index, considered robust in comparison to the frequently used GVC participation index, for determining the impact on emissions. The forward and backward participation indices are considered in the analysis. The paper presents an analysis of 62 developing and developed economies from 1995 to –2018 using the Juodis A., Y. Karavias, and V. Sarafidis [2021. “A Homogeneous Approach to Testing for Granger non-Causality in Heterogeneous Panels.” Empirical Economics 60 (1): 93–112] approach, which is an improvement over the traditional approaches to analysing causality. The results show that the overall position in GVCs positively affects CO2 emissions for developing countries but a causal relationship does not exist for the developed countries. The developed countries attain a higher participation index but a lower position index. On the other hand, developing countries with fewer stringent environmental regulations may opt for an upstream position (more export-oriented) and by design specialize in more pollution-intensive industries. Noteworthy, production-based emissions in developed countries are reduced because of an increase in imports of emission-intensive products from developing countries.

Trade Policy Review of Turkey

AbstractThis paper examines the WTO's 2023 Trade Policy Review (TPR) of Turkey, covering 2016–2022. As Turkey marked its centenary in 2023, the TPR allows for critical reflections on Turkey's global and European economic integration and its evolving economic policies. The review period witnessed key developments: heightened tensions with the European Union (EU), the country's transition into a presidential system, and the impacts of COVID‐19 and the Ukraine war. Turkey continued its state‐led development and proactive industrial policy post‐Global Financial Crisis, aiming to reduce the current account deficit, diversify exports, advance technological sophistication and enhance its position in global value chains (GVCs). Recently Turkey has further aligned its import–export regimes and trade negotiations with these strategic goals, increasing its Most Favoured Nation tariffs and adopting localisation strategies to support key sectors. Turkey navigated the pandemic effectively, bolstering its role in global supply chains, as indicated by its increased trade‐to‐GDP ratio. This underscores its economic resilience and strategic location. However, Turkey's trade policies are increasingly diverging from those of the EU, its main trade and supply chain partner and Customs Union ally. Turkey's new Regional Trade Agreements aim for deeper sectoral integration with partners other than the EU.

RCEP regional value chain construction and global value chain position enhancement: a measurement analysis based on regional value chains

RCEP regional value chain construction and global value chain position enhancement: a measurement analysis based on regional value chains

Made or Invented in Hungary? – Upgrading Possibilities in Light of Global FDI Tendencies

This paper analyses industrial upgrading possibilities for the Hungarian economy in light of recent changes in global Foreign Direct Investment activities. The changing economic landscape provides a reason to investigate the impact of the recent developments in Hungary, a country with an open, dependent economy. The study investigates how the front-running sector, the manufacturing industry, performs during the current, turbulent times. Does it upgrade from the earlier assembly-focused positions in global value chains, or are there any signs of deterioration by backshoring certain activities to the headquarters of multinational companies? By using both primary and secondary research and conducting a regional comparison, the study finds that the Hungarian economy still shows the characteristics of a “factory economy”, but progress has been made towards the aspired “knowledge economy” status.

Measuring Structural Power in Global Value Chains: Evidence from Malaysian Manufacturing

The global value chain (GVC), as the most important feature and driving force of globalisation has profoundly shaped state–market relations, as well as the international political economy. This paper uses Malaysia as a case study to demonstrate a country’s embedding structural power in GVC. Deploying the OECD’s Inter-Country Input-Output Table from 1995 to 2018, two indicators were constructed, namely power of value added (PV) and interaction of value added (IV), to measure Malaysia’s structural power in GVC. The results indicate that Malaysia’s PV in GVCs has declined over the years. A combination of high GVC participation but low GVC position indicates that Malaysia’s export sector remains stuck in low value-added activities despite being highly integrated into global production networks. Also examined is the value-added interaction between Malaysia and major economic powers, such as the US, China and Japan. In so doing, we provide an evolutionary explanation of Malaysia’s location in the international political economic system where economic and political power are increasingly intertwined.

The impact of global value chains on wages, employment, and productivity: a survey of theoretical approaches

This study presents a systematic literature review to provide a collection of theories explaining the impact of global value chains (GVCs) on labour market outcomes. Due to the complex nature of GVCs and the interconnectedness of wages, employment, and productivity, many direct and indirect effects are at play. To ensure a transparent and systematic flow of the review process, I follow the PRISMA guide. Eventually, 36 records out of 1221 results from Scopus database were selected. This review may be useful for theorists, empirical economists, and policy makers as an overview of theoretical developments and convenient map of potential outcomes expected from involvement in GVCs. It identifies and systematizes a number of effects existing in the literature under various names. The results show that the predictions from the theory are ambiguous. The positive effects which may emerge regardless the characteristics of the GVC are the productivity-enhancing effect and the cross-effect, especially important considering growing servicification of manufacturing. Here lies the critical role of the state and policies to assure that the losses will not exceed the gains in the aggregate terms. One of the main factors shaping the outcome is the power distribution among the GVC’s firms. Additionally, this paper shows the shortcomings of the existing theories. Less aggregated levels of analysis could be a great input to the discussion, as well as addressing different GVCs’ dimensions and types of organisation. The understanding of relation between GVC position and labour market is especially worth exploration as the existing evidence adopt different and even contradicting perspectives on the definition of upgrading the GVC position.

Overseas operations, global value chain position and technological innovation

Based on a sample of Chinese listed companies with overseas operations from 2010 to 2020, this study empirically studies the impact of multinational corporations (MNCs) overseas expansion on their technological innovation and the moderating effect of the global value chain position. Based on the combination of internalization innovation theory and global value chain approach, the results of this study show an inverted U-shaped relationship between overseas operations of MNCs and technological innovation due to the simultaneous existence of the learning effect, advantages of economies of scale, internal and external coordination costs, and technology spillover risk, and the above positive and negative effects play different roles at different stages of MNCs’ overseas operations. The moderating effects test find that global value chain position strengthens the positive effect of low degree of overseas operations and weakens the negative effect of high degree of overseas operations on technological innovation. Furthermore, this study also distinguishes the heterogeneity of industry attributes and subsidiary types.

Study on the Enhancement of China’s Manufacturing Global Value Chain Position under the “Belt and Road” Initiative

Study on the Enhancement of China’s Manufacturing Global Value Chain Position under the “Belt and Road” Initiative

Global value chains before and in times of the COVID-19 pandemic

Abstract This paper aims to examine the changes in global value chains (GVCs) in the years 2020–2022 (times of the COVID-19 pandemic) compared to 2019 (last year before the pandemic). GVCs are illustrated by diagrams based on the statistics on international trade measured by value-added exports and imports. In this paper, the final demand approach is applied to measure international trade by value-added exports and imports and they were computed based on inter-country input-output tables delivered by the Asian Development Bank (ADB). The catchphrase “Made in the World” makes an impression, but in reality, value chains are rarely global. They are rather regional with three centers. “Factory Europe”, “Factory Asia”, and “Factory America” can easily be identified in the years 2019–2022 as there were three large regional supply hubs in GVCs: Germany, China, and the United States. When the years 2020–2022 were compared to 2019, “Factory Asia” with center in China elevated their position in GVCs at the expense of “Factory Europe” with center in Germany and “Factory America with center in the USA.”

Firm's position in global value chains and its impact on pollutant emissions: Evidence from Chinese manufacturing firms

This paper studies examines how a firm's position in the global value chain affects its pollutant emissions. This paper integrates China's firm-level trade data into China's multi-regional input-output tables to provide an index to measure a firm's position in global value chains. Based on a firm-level pollution dataset (2000–2014) in China, this paper conducts an empirical analysis and find that the most-downstream firms on the global value chain have lower pollutant emission intensity. Our results also suggest that the production factor structure effect, the knowledge absorption effect and the abatement investment effect together contribute to the emission intensity gap between the most-upstream firms and the most-downstream firms. These novel results are significant in guiding firms towards reducing their emissions and promoting a green global value chain, with the ultimate goal of achieving multinational environmental protection.

Land price regulation and firms' global value chain position: Evidence from China

Exorbitant land prices have been a significant constraint on firm growth; however, few studies have explored their effect on firms' global value chain (GVC) positions. By treating the 2007 minimum price policy for industrial land as a quasi-natural experiment, this study estimates the impact of land price regulations on firms' GVC positions. Using a difference-in-differences method with continuous treatment intensity, we find that industrial land price regulation has a remarkably negative effect on firms' GVC positions. This effect is primarily observed in small- and medium-sized enterprises and private enterprises. The mechanism analysis suggests that industrial land price regulation has significantly increased the cost of land purchases by firms, squeezing their investment in innovation and reducing the quality of intermediate inputs, thereby degrading their position in GVCs.

Does digital technology enhance the global value chain position?

Embedding new technology creates opportunities and challenges for the global value chain (GVC). Using country-level panel data from 59 economies in 2007–2018, we construct a fixed-effects model to investigate the relationship between digital technology and the GVC position. Moreover, we examine how digital technology affects the GVC position with a mediating model and consider the heterogeneity of this impact on GVC status. The main findings reveal a U-shaped relationship between digital technology and the GVC position, which means that, during the catch-up stage of digital technology, negative effects on input demand chains lead to a decline in GVC status, whereas, at a mature phase of technological development, positive effects on output supply chains enhance the GVC position. The impact of digital technology on the ascent in GVC status is mediated by productivity. Moreover, we analyze the different impacts of trade openness and economic development levels. Our findings suggest that countries with lower levels of economic development and high trade openness reach a U-shaped inflection point, accelerating their progression in the global value chain.