Taking a Bigger Slice of the Global Value Chain Pie: An Industry-Level Analysis

Abstract

This paper analyzes how countries are linked into global value chains and their export performance in value added terms. We estimate the relationship between a country’s mode of integration into global value chains, represented by global value chain participation and position indices, and its share in world’s total value added at the aggregate and sectoral levels. We use OECD-WTO Trade in Value Added data of 61 countries over the period between 2000 and 2011. Based on the estimation results, we find that the extent of their upstream and downstream activities within global value chains is one of the key determinants of countries’ export performance in value added terms. At the aggregate level, countries located upstream are associated with a higher share in total valued added. At the sectoral level, the positive effect of participating in global value chains thorough upstream activities on the share in total value added is apparent in the automotive industry, whereas the benefits of downstream activities are pronounced in the electrical and optical industry. Countries are expected to reap benefits from linking into global value chains either through forward or backward linkages in the textiles and foods industry. Thus, the effects of the mode of integration into global value chains on the share in total value added are found to be heterogeneous across industries.

Keywords: Global value chain, Trade in value added, Forward linkage, Backward linkage

JEL Classification: F10, F14