Does the Complexity of GVC Participation Matter for Productivity and Output Growth?

Abstract

This paper investigates the determinants of total factor productivity and income growth by taking into account both the position of the industry in the global value chain and the complexity of participation for the period of 1996-2009 for 40 developed and developing countries. Our estimation results clearly show that while all measures of forward GVC participations raise the total factor productivity growth of manufacturing industries, there is no effect of participation into GVCs on the productivity of services sectors. Almost all measures of backward and forward GVC substantially promote the output growth of manufacturing and services industries. These significant results provide strong evidence for the learning by trading hypothesis and indicate the importance of deeper involvement into GVCs for higher sectoral productivity. Substantial evidence for the positive impact of importing and exporting intermediates, participating in GVCs, on sectoral performance imply that the successes of industries highly depend on their efficient integration in the global production process.