Involvement In Global Value Chains Research Articles

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.

Servicification in Global Value Chains in Emerging and Developing Asian Economies

Servicification in global value chains (GVCs) in emerging and developing Asian economies has become a trend recently. However, there have been no scientific studies to elucidate the mechanism of servicification in GVCs. To fill this gap, this study aims to investigate the involvement of service sectors in GVCs in Asian economies in terms of the quantitative interactions between service inputs and manufacturing exports and inputs and between service inputs and service exports. For this purpose, a panel vector-autoregressive model and the Trade in Value Added database of the Organization for Economic Cooperation and Development (OECD) were used for the empirical analysis during 1995–2018. The estimation results find that, first, there exist reciprocal interactions between the business services and manufacturing sectors; foreign business service inputs are induced by manufacturing exports, whereas manufacturing inputs are induced by business service exports. Second, foreign manufacturing inputs facilitate foreign business service inputs. Third, business service inputs are promoted by business service exports. These trends in the involvement of business services’ involvement in GVCs have accelerated since the mid-2000s. To enhance the role of services in GVCs, Asian economies should facilitate the removal of explicit restrictions in service trade and address regulatory divergence across countries.

Unveiling the asymmetric effects: global value chain participation and income inequality

ABSTRACT This study employs a panel nonlinear ARDL model to analyse the asymmetric effects of global value chain participation and its components (forward and backward participation) on income inequality across 29 economies spanning from 2004 to 2018. The findings reveal that global value chain participation is negatively associated with income inequality in the long run, as it stimulates employment opportunities, economic growth, and access to markets. Concomitantly, our study sheds light on whether the effects of global value chain participation vary across its components within the selected economies. Both positive and negative changes in backward participation have positive and significant effects on income inequality in the long run. Simultaneously, adverse changes in forward participation contribute to an upward trajectory in income inequality over the same period. The comprehensive analysis highlights the multi-faceted dynamics between a country’s involvement in global value chains and income disparities within that nation. Given the findings, policymakers need to make it a top priority to boost their economies’ participation in global value chains. This can be accomplished through a multi-pronged strategy that includes trade liberalization policies, measures to attract foreign direct investment, and robust infrastructure development initiatives.

The Role of Russian Non-Resource Export in Technological Sovereignty Achievement of African Countries

The modern trends of world economic development include complicated digital and transformation processes, which create a wide range of risks and challenges to the actual positions of countries in the world architecture. Also, they open new opportunities for competitiveness and welfare improvement of any state or regional groups, in particular by their technological sovereignty creation. The share of African countries in the world trade accounts for 3%, however, the interest in this region, as a foreign trade partner, is increasing. This is driven by the intensity of considerable reserves of natural resources, existing and potential in the sphere of renewable energy sources and of local production involvement in global value chains. All this stimulates to elaborate on their own technologies, mitigating the extent of regional economic dependence on external factors. Thus, the African region continues to attract investors, and from this position, Russia is not the exception. At the moment, amid sanctions and diversification of export flows, African countries are actual for Russian producers and suppliers from the implementation process. This paper highlights the key positions of Russian non-resource commodities to African countries, defines the major markets of sales and also to analyze the role of Russian export in African countries’ technological sovereignty achievement.

At the territorial roots of global processes: Heterogeneous modes of regional involvement in Global Value Chains

Despite the large evidence of the recent globalization phenomenon at national level, very little is known about the involvement of regional economies in Global Value Chains (GVCs). Instead, the regional dimension of GVCs is of primary importance since regions require an absolute advantage to be part of an international production chain. It can in fact be easily the case that within the same country both the participation and the gains from GVCs strongly differ among regions. In going to the territorial roots of GVCs, the paper aims to conceptualize a taxonomy of different modes in which regions can be involved in GVCs, based on different intensity of participation and rewarding conditions. Based on regional trade in value added matrices, the taxonomy is applied to the manufacturing sector at NUTS2 regions in Europe, combining two indicators of regional participation and ‘terms of trade’ imposed in the chain. Although national patterns are visible, and a clear divide between Eastern and Western Europe emerges, the modes of involvement are highly diversified within countries. Moreover, through a multinomial logit model, the local characteristics associated with the different roles that regions can have within GVCs are looked for. Their identification has far-reaching normative consequences that intervene in the capacity of regions to gain from participation in GVCs, and to mitigate the interregional income distribution effects that this involvement may cause.

The impact of automation on labour market outcomes in emerging countries

AbstractThe labour market effects of automation have gained significant attention from scholars and policymakers. Concerns about negative effects are important in emerging countries, where a rapid acceleration of robot adoption and an increasing involvement in global value chains have been observed in recent years, with the subsequent increase in exposure to foreign competition. This paper estimates the effect of local and foreign robots on labour market outcomes and labour shares using a panel dataset composed of 16 sectors and ten emerging countries from 2008 to 2014. The endogeneity of robots' adoption is addressed with an instrumental variables approach and using a shift‐share index of exposure to foreign robots. The main results for all sectors show that foreign robot adoption has negatively affected employment in emerging countries. When exploring sectoral heterogeneity, we find that the foreign robots' negative effect on employment has occurred in many sectors, being more prominent in those with higher exposure to foreign robots. Moreover, we found small and negative inter‐sectoral spillover effects of local robots on employment and wages. Finally, the results also show that the labour share is affected in some sectors of emerging countries by both the use of local and foreign robots.

Sub‐Saharan Africa's participation in global value chains: 1995–2021

AbstractThis paper examines Sub‐Saharan Africa's (SSA) role in global value chains (GVCs) through a new comprehensive country‐sector level database. It reaffirms known aspects: SSA's involvement in GVCs has grown but still trails other regions, especially in manufacturing. Typically, SSA is involved in upstream production stages, exporting commodities that are later processed and re‐exported by other countries. Only few SSA countries have integrated into manufacturing GVCs, importing inputs for export production. SSA also engages more in GVCs with external partners than with other SSA countries. Yet, new insights also emerge. SSA increasingly provides inputs for its own export products, though not for domestic sales. Additionally, African GVCs are shifting alliances; China and India are rising as sources for supply of inputs and final demand, overtaking Europe. However, the United States and Europe remain pivotal final destinations for African goods and re‐export hubs of African value added.

Productivity and Global Value Chains: A Tale from the Indonesian Automobile Sector

Low productivity and quality of employment have always been a big problem in Indonesia, caused by the lack and mismatch of skills in the workforce. Labor productivity (LP) describes the company’s ability to produce something. This can be determined by added value or output. Several factors influence LP, such as education, age, and training. The concept of global value chains (GVCs) has become an integral part of economic activity, and trade within global production networks has grown more rapidly than conventional trade in final goods. GVCs have both positive and negative impacts on employment opportunities. The automotive industry is categorised as one of the ten primary priority industries in the Indonesian manufacturing sector. This research analyses the impact of LP on GVC integration in the Indonesian automotive industry. The data used in this research comes from the World Input–Output Database (WIOD) and the Central Statistics Agency (BPS) from 1995 to 2014. The variables used include the number of workers, added value, real wages, and GVC, which were calculated by the author using the Inter-Country Input–Output (ICIO) approach. Using ICIO analysis, the following matrix should be constructed to determine involvement in GVCs. This research shows that LP in the Indonesian automotive industry has a positive trend, and the GVC position in the Indonesian automotive industry has a positive trend line. The domestic value chain increased from 4% to 33%. This improves the ability to produce higher value-added and intermediate export goods. LP increases the domestic value chain in the Indonesian automotive industry, leading to global value chain integration. Thus, LP goes hand in hand with integrating GVCs.

Joint foreign ownership and global value chains effects on productivity: a comparison of firms from Poland and Germany

PurposeThe study aims to examine the joint effects of foreign ownership (FO) and involvement in global value chains (GVCs) on the productivity performance of firms from a catching-up country (Poland) and a leader economy (Germany).Design/methodology/approachThe authors use micro-level data on firms combined with several sector-level GVC participation measures. The authors investigate whether the link between productivity and the overall sectoral degree of involvement in global production structures depends on a firm's ownership. The authors verify the robustness of the obtained results by using an instrumental variables approach and weighted regression.FindingsThe results show that domestically owned firms are less productive than foreign ones, which is particularly true at low GVC participation levels. However, as GVC involvement increases, the FO productivity premium decreases, leading to productivity catching up between foreign and domestically owned firms. This mechanism is similar in Poland and Germany. However, in the leader country (Germany), the productivity performance of domestically owned firms is more stable along the distribution of GVC involvement.Originality/valueThis study contributes to the foreign direct investment (FDI)–productivity literature by comparing the catching-up and developed countries' perspectives and incorporating the productivity–GVC relationship into the FDI analysis. The authors show that the FO premium is not confined to the developing context but is also present in a leader country. Moreover, the link between productivity and the overall sectoral degree of involvement in global production structures depends on a firm's ownership.

New insights on the relationship between the involvement of countries in global value chains, and intra- and inter-country inequalities

Recent economic growth cannot be understood without considering the emergence of Global Value Chains (GVCs). However, recent literature has highlighted that economic upgrading cannot be taken as a granted result of the involvement in GVCs, and it does not necessarily lead to positive social outcomes. We explore whether the recent performance of countries in the GVCs has significantly conditioned the intra- and inter-country inequalities. Using a combined multisectoral-multiregional (MRIO) and econometric approach, we analyze 67 countries during 1995–2018. Regarding involvement in GVCs, we look into “smile curves”, in reference to the quadratic relation between position and inequality. The results show different geographical patterns. For intra-country inequality, we find significant “smile curves” in Developed, African, Latin American, and Asian countries, so these can reduce internal inequalities by moving to intermediate positions in GVCs. For inter-country inequality, results suggest opportunities for catching-up in Latin America and Africa by specializing in the tails.

GVC involvement and the gender wage gap: Micro-evidence on European countries

We examine linkages between involvement in global value chains (GVCs) and gender wage inequalities. We use merged data from Structure of Earnings Survey and the World Input Output Database covering 18 European countries. We employ information on employees’ personal and company characteristics and a sectoral involvement in GVCs. In general, the wages of workers from sectors more involved in GVCs are lower. However, the relationship between GVC and wages differs according to gender: women are more affected by the negative impact of greater trade involvement than men. There is some education/skill heterogeneity: workers with a medium level of education and medium skills are most affected. Our results show different patterns for concentrated and competitive industries: a greater female wage penalty due to GVC intensification is observed in less competitive sectors. Finally, using the RIF decomposition we differentiate GWG into explained and unexplained part with GVC being responsible for the latter.

Modelling Determinants of Inflation in CESEE Countries: Global Vector Autoregressive Approach

Abstract After a prolonged period of relatively stable price levels, the beginning of the third decade of the 21st century has brought inflation once again into the spotlight. This paper focuses on the inflation dynamics in a set of post-communist countries that eventually became members of the European Union. Due to EU accession augmented by the globalization process and involvement in global value chains (GVC), the international impacts are becoming progressively important for the domestic inflation dynamics and domestic variables are not sufficient to fully describe the domestic inflation dynamics. The employed methodology, Global Vector Autoregressive (GVAR) approach, allows modelling interactions and spillovers among countries, making the most of its advantages over the usual VAR models that model each economy separately and panel models, where countries are often treated as independent units. The results of the empirical analysis confirm that the globalisation process has led to increasing the importance of international impacts on the domestic inflation dynamics. On the other hand, the results also indicate that accounting for a larger set of countries decreases the severity of the commodity price shocks and makes them less persistent. Furthermore, monetary policy acts as a buffer against adverse shocks, especially in the countries that are still not members of the euro-zone. The findings of the paper show that the analysed countries are pronouncedly heterogeneous. Hence, each of the analysed economies has its own set of country-specific factors which, from country to country, play a more important or a less significant role in explaining national inflation dynamics. Thus, the paper should contribute to a more comprehensive understanding of the inflation dynamics in the policy-making context.

Within- and between-firm wage inequalities and trade integration in GVC

This paper examines between- (inter) and within- (intra) firm wage inequality using rich employer-employee data for 12 European countries. We confirm that much overall wage inequality is observed within sectors and within occupations. The share of the within- and between-firm components in overall wage inequality varies across countries. We estimate the link between involvement in global value chains (GVCs) and wages differentiating into the within- and between-firm components and test the hypothesis that there is a different effect of GVCs on wages depending on the position in a value chain (close to or far from the final demand). The results indicate that the between-firm wage component is the main channel through which involvement in global value chains is materialised. However, the exact sign of the relationship between GVC growth and wages (conditioned on upstreamness) is country-heterogeneous albeit its marginal economic significance.

Risks and perspectives of higher school transformation for the russian economy in conditions of gobalization and digitalization

The article examines the risks and possible prospects for the transformation of higher education from the standpoint of the Russian and world economy, identifies the main reasons for the current situation in terms of the influence of foreign capital on the level of competitiveness of the domestic economy's production capacities and its involvement in global value chains. An analysis of the risks of increasing the dependence of Russian higher education on the global market of educational services is carried out. This may negatively affect the preservation of the potential of human capital in the domestic market of the country. In this regard, the current trends in the field of educational activity, including the globalization of higher education in the context of digitalization, as well as the process of internationalization of scientific research, are considered. Additional trends in the transformation of higher education were identified that could contribute to the sustainable development of the Russian economy, primarily in the domestic market, taking into account the involvement of Russia in the system of international division of labor. Based on the results obtained, the key directions of the development of Russian higher education are identified, taking into account possible risks and prospects in order to achieve sustainable development of the Russian economy based on the long-term development of the domestic market, where special attention is paid to the human capital of the country, including not only material, but also moral aspects of society.

Инновационные точки роста обрабатывающей промышленности региона

The withdrawal of foreign companies from the Russian market has led to the emergence of market niches that can be occupied by domestic manufacturers. Russia’s involvement in global value chains has led to a serious dependence on products from abroad and, as a result, to the degradation of a number of technological industries. With the strengthening of Western sanctions, the prompt replacement of goods that have ceased to be supplied to the country is a priority task for the executive authorities. The policy of import substitution, the implementation of which began in 2014, has been more successful in ensuring the national food security of the country, while high-tech industries are still critically dependent on imported equipment and technologies. Therefore, the identification of points of innovative growth in the regions allows us to identify manufacturing industries whose support will lead to leveling the negative consequences of the shortage of certain products in the domestic market. Until 2022, imports of technologically complex goods from the EU, the USA, and other countries included in the list of “unfriendly” occupied a significant share in the foreign trade of most regions. The regions of the Northwestern Federal District are industrially developed, and the problem of obsolescence of fixed assets was solved mainly through cooperation with foreign companies. Thus, the identification of promising industries capable of producing analogues of these goods is an urgent task for research. The aim of the study is to identify innovative points of growth of the manufacturing industry in the economy of the regions of the Northwestern Federal District of Russia. The article analyzes the structure of the economy of the regions in the District, their industry specialization, including the production of innovative products. The main methods of solving problems in the work are the use of the specialization coefficient for the average number of employees, the coefficient of specialization in the production of innovative products, and the coefficient of use of advanced production technologies. After comparing the indicators of specialization by the number of employees and the production of innovative products, the industries, whose activation can become a driver of the region’s economic growth in the near future, are identified. The region’s specialization in the production of innovative products determines the long-term prospects for its development for stable socio-economic development. In this regard, recommendations are developed for executive authorities to support certain types of economic activity, to activate the transition to the production of products with higher added value and to simplify the procedures for commercialization of the developed technologies. The results of the study are useful for the executive authorities of the region and scientists researching regional development problems.

Distributed production under the pandemic shock: Vulnerability, resilience and the new stage of globalization

The paper draws attention to a new wave of public and academic debate on the future of globalization and on rationality of countries’ further participation in distributed production, i.e., their involvement in global value chains (GVCs) and value-added trade. Raised during the COVID-19 pandemic shock, this debate is the reaction of countries to the global diffusion of downfalls through transborder supplies. We analyze vulnerabilities of GVCs to sudden shocks, demonstrate the role of these risks in escalating the 2020 global recession and in shaping its unique features, as well as scrutinize the emerging post-pandemic strategies of leading MNEs for enhancing the GVC resilience. We argue that despite the collapse of the just-in-time supply system and the crucial dependency of many domestic industries on imports from China, the pandemic shock could neither undermine foundations of distributed production nor lead to mass reshoring. On the contrary, both analyzed practice and surveyed econometric literature confirm that benefits of countries’ participation in GVCs outweigh risks of their falling under potential rippling disruptions. Moreover, MNEs’ resilience strategies, which we classified into three interrelated lines of action (restructuring of GVCs’ supplier networks, production optimization, and GVCs’ digital transformation), give globalization a new impetus. We conclude with describing the changing features of distributed production under the ongoing GVCs’ restructuring and outline a number of promising export opportunities that objectively open up in the 2020s for developing economies, including Russia. In the course of our study, we examine key properties of resilient systems (robustness, flexibility, redundancy), some new notions (disruption risks, ripple effect, etc.), and new management approaches relevant for all types of economies and businesses under increased uncertainty.

Icio: Economic analysis with intercountry input–output tables

Several new statistical tools and analytical frameworks have been recently developed to measure countries’ and sectors’ involvement in global value chains. Such a wealth of methodologies reflects the fact that different empirical questions call for distinct accounting methods and different levels of aggregation of trade flows. In this article, we describe icio, a new command for the computation of the most appropriate measures of trade in value added as well as participation in global value chains. icio follows the conceptual framework proposed by Borin and Mancini (2019, Policy Research Working Paper WPS 8804; WDR 2020 Background Paper, World Bank Group), which in turn extends, refines, and reconciles the other main contributions in this strand of the literature. icio is flexible enough to work with any intercountry input–output table and with any level of aggregation of trade flows.

Trade balances and global value chains: Is there a link?

This paper assesses whether and how the participation to Global Value Chains (GVCs) contributes to trade imbalances. We test empirically the relationship between GVCs participation and a country’s net export for 42 countries in the period 2000–2014, using the World Input - Output Database (WIOD) on international production linkages. We find that trade balance is positively associated with countries’ involvement in GVCs, but the trade balance worsens the higher the offshoring to lower-income countries, while it improves the higher the offshoring to higher-income countries. This asymmetry suggests that when countries offshore to higher-income partners the gains in competitiveness overcome the potentially negative effect of larger imports of intermediate inputs.

The Impact of Local and Foreign Automation on Labor Market Outcomes in Emerging Countries

In the XXI century, the labor market effects of automation have gained significant attention from scholars and policymakers alike. Concerns about potential negative effects are particularly relevant in emerging countries, where a rapid acceleration of robot adoption and an increasing involvement in global value chains has been observed in recent years, with the subsequent increase in exposure to foreign competition. This paper estimates the effect of local and foreign robots on labor market outcomes and labor shares using a panel dataset composed of 16 sectors and ten emerging countries from 2008 to 2014. The endogeneity of robots’ adoption is addressed with an instrumental variable approach and using a shift-share index of exposure to foreign robots. When all sectors are considered, the main results show that only foreign robot adoption, but not local, has affected employment, whereas no effects on the labor share are found. When exploring sectoral heterogeneity, we find that the foreign robots’ effect on employment has mainly occurred in the agricultural and industrial machinery sectors, the former being driven by a reduction of offshoring and affecting nearly 60% of jobs in emerging countries.

Working Conditions in Global Value Chains: Evidence for European Employees

This article investigates a sample of almost nine million workers from 24 European countries in 2014 to conclude how involvement in global value chains (GVCs) affects working conditions. We use employer–employee data from the Structure of Earnings Survey merged with industry-level statistics on GVCs based on the World Input-Output Database. Given the multidimensional nature of the dependent variable, we compare estimates of the Mincerian wage model with zero-inflated beta regressions focused on other aspects of working conditions (overtime work and bonus payments). Wages prove to be negatively related to involvement in GVCs: workers in the more deeply involved sectors have lower and less stable earnings, implying worse working conditions. However, they are also less likely to have to work overtime. We prove that the analysis of social implications of increasing involvement of countries in global production must compare wage effects of GVCs with other aspects of complex changes in workers’ well-being.