How important is global value chain participation (GVC) to export upgrading

in: UNU-MERIT Working Papers No. 2020-026

Information

Exporting higher-quality and complex products are deemed pathways to economic growth and development. However, producing such products are knowledge-intensive and require quality intermediate inputs and advanced technologies. Integration into global trade networks is increasingly argued to be amongst the pathways to obtain such inputs and technologies, although not all countries may benefit equally from such integration. This paper builds on these arguments and investigates how participation in the global value chain (GVC) affects export-quality. We use a sample of 120 developed and developing countries and find that participation in GVC impacts positively on export quality and, also, brings the export quality of countries closer to the quality frontier, but these effects only work through backward linkages. While this result persists in the sub-sample comprising developing economies, we, however, find that developed countries benefit from both forward and backward linkages in GVC. Overall, the results indicate that GVC participation matters to export upgrading but points to a potential heterogeneity on the channel of impact across countries at different levels of development.