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Do Global Value Chains Cause Industrial Development?

Victor Kummritz ()
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Victor Kummritz: Graduate Institute of International and Development Studies - Centre for Trade and Economic Integration

Authors registered in the RePEc Author Service: Victor Stolzenburg ()

No 01-2016, CTEI Working Papers series from Centre for Trade and Economic Integration, The Graduate Institute

Abstract: Global Value Chains (GVCs) have become a central topic in trade and development policy but little is known about their actual impact on economic performance. Using a new unique set of Inter-Country Input-Output tables with extensive country coverage, I show that an increase in GVC participation leads to higher domestic value added and productivity for all countries independent of their income levels. Causality is established by building a novel value added trade resistance index that combines third country trade costs with industry-specific technological variables leading to an exogenous variation in GVC participation. Based on the preferred IV specification, I find that a 1 percent increase in backward GVC participation leads to 0.11% higher domestic value added in the average industry. Equally, I find for forward linkages that a 1 percent increase in GVC participation leads to 0.60% higher domestic value added and to 0.33% higher labour productivity.

Keywords: Global Value Chains; International Trade; Economic Development (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 F63 (search for similar items in EconPapers)
Pages: 38
Date: 2016-03-23
New Economics Papers: this item is included in nep-int and nep-tid
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