Does participation in energy GVCs promote value-added growth?

Abstract

We investigate the impact of energy GVC participation on sectoral value-added growth in 44 countries for the period of 1995-2022. Backward participation in crude oil and natural gas crowds out value-added growth across all sectors. In contrast, forward participation in total energy, coal, and crude oil promotes value-added growth in manufacturing and services. Generally, backward integration into crude oil and natural gas value chains does not significantly drive industrial expansion, whereas forward linkages in the energy sector contribute to greater value addition in downstream production. This suggests that exporting energy intermediaries might not necessarily be a resource curse, instead they can serve as a catalyst for downstream sector growth. Our results also imply that the impact of energy GVCs depends on the sectoral heterogeneity, the direction of GVC participation, and the types of energy sources. To benefit the most out of energy GVCs, countries should consider all these points and implement relevant policies accordingly.