Global Value Chains and Productivity: Micro Evidence from Estonia

42 Pages Posted: 23 Jul 2020

See all articles by Hang Banh

Hang Banh

University of New South Wales (UNSW)

Philippe Wingender

International Monetary Fund (IMF) - Fiscal Affairs Department

Cheikh Anta Gueye

International Monetary Fund (IMF)

Date Written: July 1, 2020

Abstract

The COVID-19 pandemic has led to an unprecedented collapse in global economic activity and trade. The crisis has also highlighted the role played by global value chains (GVC), with countries facing shortages of components vital to everything from health systems to everyday household goods. Despite the vulnerabilities associated with increased interconnectedness, GVCs have also contributed to increasing productivity and long-term growth. We explore empirically the impact of GVC participation on productivity in Estonia using firm-level data from 2000 to 2016. We find that higher GVC participation at the industry level significantly boosts productivity at both the industry and the firm level. Frontier firms, large firms, and exporting firms also benefit more from GVC participation than non-frontier firms, small firms, and non-exporting firms. We also find that GVC participation of downstream industries has a negative correlation with productivity. Frontier firms and large firms benefit more from GVC participation of upstream industries, while non-frontier firms and small firms benefit more from GVC participation of downstream industries. Our results suggest that policies designed to promote participation in GVCs are important to raise aggregate productivity and potential growth in Estonia.

Keywords: Total factor productivity, Economic growth, Price indexes, Financial crises, Labor productivity, global value chains, trade, productivity, WP, industry level, endogeneity, world level, export firm, interaction term

JEL Classification: F14, F15, L25, O47, E01, O4, C43, L16, F1

Suggested Citation

Banh, Hang T. and Wingender, Philippe and Gueye, Cheikh Anta, Global Value Chains and Productivity: Micro Evidence from Estonia (July 1, 2020). IMF Working Paper No. 20/117, Available at SSRN: https://ssrn.com/abstract=3658593

Hang T. Banh (Contact Author)

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

Philippe Wingender

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States
202-623-9831 (Phone)
202-623-4199 (Fax)

Cheikh Anta Gueye

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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