Can value chain integration explain the diverging economic performance within the EU?

Agnes Kügler, Andreas Reinstaller () and Klaus Friesenbichler

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2023, vol. 50, issue 1, No 4, 25-47

Abstract: Abstract This paper studies the interplay of integration into EU value chains and industrial development measured by labour productivity. We focus on the mediating role of domestic institutions compared to technological determinants for the distribution of the economic value generated along the European and global value chains. Our integration indicator measures value chain trade within the Single Market relative to global value chain networks. Using a simultaneous equation model, we find an overall positive effect of integration on labour productivity, which is driven by upstream integration. While the effect of productivity on integration is positive, it decreases with increasing productivity levels. Highly productive industries rather seek global value chain trade than regional integration. Better domestic institutions facilitate EU integration, although they favour industries with less complex product portfolios and lower levels of knowledge cumulativeness. This creates politically unwanted specialisation effects leading to an unequal distribution of the economic value generated.

Keywords: EU integration; Value chains; Productivity; Institutions; Industrial development; Product complexity (search for similar items in EconPapers)
JEL-codes: F13 F14 O25 O43 O52 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Working Paper: Can value chain integration explain the diverging economic performance within the EU? (2022)
Working Paper: Can Value Chain Integration Explain the Diverging Economic Performance within the EU? (2022)
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DOI: 10.1007/s40812-022-00236-y

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