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

Giulia Felice () and Lucia Tajoli ()

Structural Change and Economic Dynamics, 2021, vol. 59, issue C, 228-246

Abstract: 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.

Keywords: External imbalances; Global value chains; Input-output tables (search for similar items in EconPapers)
JEL-codes: F14 F15 F62 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.strueco.2021.08.013

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