Global Value Chains: What are the Benefits and Why Do Countries Participate?

By Faezeh Raei, Anna Ignatenko, Borislava Mircheva

January 18, 2019

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Faezeh Raei, Anna Ignatenko, and Borislava Mircheva. Global Value Chains: What are the Benefits and Why Do Countries Participate?, (USA: International Monetary Fund, 2019) accessed November 4, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Over the last two decades, world trade and production have become increasingly organized around global value chains (GVC). Recent theoretical work has shown that countries can benefit from participation in GVCs through multiple channels. However, little is known empirically about the economic importance of supply chains. We use the Eora MRIO database to compute different measures of GVC participation for 189 countries and illustrate global patterns of supply chains as well as their evolution over time in order to contribute to this topic. We find that GVC-related trade, rather than conventional trade, has a positive impact on income per capita and productivity, however there is large heterogeneity and the gains appear more signifcant for upper-middle and high-income countries. We document that “moving up” to more high-tech sectors while participating in major supply chains does take place but is not universal, suggesting other factors matter. We confirm the findings of the standard gravity literature for GVC trade; highlighting the key role of institutional features such as contract enforcement and the quality of infrastructure as determinants of GVC participation.

Subject: Economic sectors, Exports, Global value chains, Globalization, Human capital, International trade, Labor, Manufacturing, National accounts, Personal income

Keywords: Exports, Gains from trade, Global, Global value chains, GVC export, GVC participation, GVC trade, Human capital, Manufacturing, Participation indices, Personal income, Position index, Trade, WP

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/018
Stock No:

WPIEA2019018
ISBN:

9781484392928
ISSN:

1018-5941

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