Economic Upgrading Through Global Value Chain Participation: Which Policies Increase the Value Added Gains?

45 Pages Posted: 1 May 2018

See all articles by Victor Kummritz

Victor Kummritz

World Trade Organization (WTO); Graduate Institute of International and Development Studies (IHEID)

Daria Taglioni

World Bank, Development Economics

Deborah E. Winkler

World Bank

Date Written: March 16, 2017

Abstract

The emergence of global value chains has opened up new ways to achieve development and industrialization. However, new evidence shows that not all countries have gained from participating in global value chains, and that country-specific characteristics matter for economic upgrading in global value chains. This paper uses two panel data sets of developing and industrialized countries at the sectoral level to relate global value chain participation as a buyer and seller to domestic value added. These are combined with a wide range of policy measures at the country level that can play a role in economic upgrading through global value chains, by targeting global value chain integration or the quality and conditions of input and output factors. First, the study finds that global value chain integration increases domestic value added, especially on the selling side, which holds across all income levels. Second, the results highlight the importance of policy for economic upgrading through global value chain integration. Although the study cannot claim causal evidence, all the assessed policy areas are consistently shown to mediate the effects of global value chains and magnify the gains for domestic value added. Third, a detailed analysis shows that several policy areas mediate the gains from global value chains more through integration as a seller. Finally, the study observes that many of the results are driven by high- and upper-middle-income countries.

Keywords: International Trade and Trade Rules, Labor Markets, Rural Labor Markets, Food & Beverage Industry, Construction Industry, Business Cycles and Stabilization Policies, General Manufacturing, Common Carriers Industry, Textiles, Apparel & Leather Industry, Pulp & Paper Industry, Plastics & Rubber Industry, Global Environment

Suggested Citation

Kümmritz, Victor and Taglioni, Daria and Winkler, Deborah E., Economic Upgrading Through Global Value Chain Participation: Which Policies Increase the Value Added Gains? (March 16, 2017). World Bank Policy Research Working Paper No. 8007. Available at SSRN: https://ssrn.com/abstract=3170147

Victor Kümmritz (Contact Author)

World Trade Organization (WTO) ( email )

Rue de Lausanne 154
Geneva 21, CH-1211
Switzerland

Graduate Institute of International and Development Studies (IHEID) ( email )

Maison de la Paix
Chemin Eugène-Rigot 2
Geneva, 1202
Switzerland

Daria Taglioni

World Bank, Development Economics ( email )

Washington, DC 20433
United States

Deborah E. Winkler

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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