Growth in Chains: EU Value Chain Productivity and its Slowdown

Tero Kuusi and Sakari Lähdemäki

No 128, ETLA Working Papers from The Research Institute of the Finnish Economy

Abstract: Abstract We examine value chain productivity within the EU15 from 1995 to 2017; a period marked by growth and its subsequent slowdown following the 2008 Financial Crisis. Using data on global value chains from the new OECD Inter-Country Input-Output Tables and KLEMS data, we construct a measure of total factor productivity (TFP) of value chains, indexed by their final producer industry. Our findings indicate that the post-crisis slowdown in productivity growth within the EU15 is attributable to both weakened TFP growth in final producer industries and slightly negative TFP growth in the rest of the value chain. Using dynamic panel estimation, we demonstrate that the spillover effects of business-related intangibles on VC TFP growth were a significant contributor to growth before the crisis, whereas the returns to tangible investments have been weak. In addition, we perform an event study analysis of globalization shocks by examining the impact of bilateral investment agreements with China. Following the implementation of the agreement, we observe a positive impact on TFP. This improvement is accompanied by an increase in business-related intangibles within the final industry of the value chain, along with modest growth in tangibles. These findings suggest a positive productivity impact of globalization, and underscore the significant role of business-related intangibles over tangibles.

Keywords: Global value chains; Intangibles; Productivity; Globalization (search for similar items in EconPapers)
JEL-codes: E22 F60 L16 O14 O47 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2025-05-26
New Economics Papers: this item is included in nep-eec and nep-tid
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