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Does International Fragmentation of Production and Global Value Chains Participation Affect the Long-run Economic Growth?

Camila do Carmo Hermida, Anderson Moreira Aristides dos Santos and Mauricio Bittencourt

Foreign Trade Review, 2022, vol. 57, issue 4, 367-389

Abstract: This article aims to investigate whether the international fragmentation of production and the global value chains (hereafter GVCs) participation affects the economic growth for a set of 40 advanced and emerging economies. It considers four aspects related to the type of participation and position in GVCs captured by different value-added measures: (a) vertical specialisation index; (b) GVC participation index; (c) GVC position index in low-tech sectors; and (d) GVC position index in high-tech sectors. A panel autoregressive distributed lag (PARDL) model is pioneeringly employed to capture the long-term relationship between economic growth and our four measures for annual value-added data from 1995 to 2011, provided by the World Input–Output Tables (WIOT). The main long-run results indicate that (a) higher levels of international fragmentation of production and GVCs’ participation ensure higher GDP per capita growth rates; (b) the fragmentation and GVCs’ participation are more important to GDP growth than the gross exports as a percentage of GDP; (c) GVCs’ participation index, which considers both the ‘forward’ and ‘backward’ participation, is less important than the vertical specialisation, measured by the foreign intermediate imports; and (d the countries engaged in upstream positions in low-technology GVCs were positively and significantly benefitted in terms of growth. JEL Codes: F14, F43

Keywords: Global value chains; vertical specialisation; value-added trade; economic growth; panel ARDL (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1177/00157325211050448

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