Technology Exports and Global Value Chain Linkages: A Comparative Sectoral Study of India

Abstract

Technology being incorporated in products, intermediate inputs and processes varies from sector to sector. Using annual time series data (1991–2017), a comparative performance of two sectors, namely, a high-tech (electronics and hardware) and low-tech (textiles and clothing), is undertaken to elaborate on the linkages between trade and technology. The empirical analysis in the form of auto regressive distribu-tive lag (ARDL) testing approach to co-integration concludes that there is strong evidence of positive long-run relationship between extensive margin, gross fixed capital formation and revealed comparative advantage (RCA) with gross exports (GE) for the textile and clothing sector. Also, there runs a bidirec-tional Granger causality between RCA and GE and unidirectional Granger causality from GE to extensive and intensive margins and production value. However, there is a lack of evidence of long-run co-integra-tion in the electronics sector. Still, a short-run positive causal relationship exists between lagged values of GE, intensive margin and production with GE. Together, the impact of these variables on the sector’s export performance varies, thus posing a challenge as well as providing a direction for the policies to reap further from this potential nexus of trade, investment and global value chains

Keywords: ARDL co-integration, GVC linkages, FDI, trade margins, R&D expenditure, revealed comparative advantage

JEL Classification: F14, F60, O19