Does GVC participation help industrial upgrading in developing countries? New evidence from panel data analysis

Bangkit A. Wiryawan, Harry Aginta and Al Muizzuddin Fazaalloh

The Journal of International Trade & Economic Development, 2023, vol. 32, issue 7, 1112-1129

Abstract: This paper assesses the impact of manufacturing global value chain (GVC) participation on industrial upgrading in developing countries. After constructing a novel manufacturing GVC dataset for 37 countries from 2001 to 2017, we apply panel fixed-effect estimation to evaluate whether value chain integration could lead to industrial upgrading. Our findings show that increasing participation in manufacturing GVC has led to structural change in the industrial sector. In the baseline model, we find a percentage rise in manufacturing GVC corresponds to 0.35–0.43% increase in the share of high-tech sector. Further analysis reveals that the upgrading channel is primarily derived from forward linkages, while backward linkages contribute in diminishing low-tech manufacturing activities. Our findings are robust under alternative estimation techniques. This linear transformation confirms earlier studies and thus highlights the critical role of GVC in promoting industrial upgrading in developing countries.

Date: 2023
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DOI: 10.1080/09638199.2022.2149840

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