Capturing the Gains in Global Value Chains: Trade in Intermediates and Value Added Erosion
نویسندگان
چکیده
Many countries in 1995-2008 have experienced what we call “value added erosion”, which describes the phenomenon of the decline in the shares of domestic value added in a country’s exports as the country becomes more integrated into the Global Value Chains (GVCs). We argue that the decline of domestic value added share in a country’s exports is likely to be caused by the expansion of high value-adding activities performed by foreign lead firms in the upper stream of the GVCs. The variables of interest namely, domestic value added share in exports, and foreign high-skilled labor embodied in a country’s exports (a proxy for high value-adding activities in foreign lead firms) were estimated using a multiregional global input-output model. Using these results with control variables, we applied a panel cointegration model and (when applicable) an OLS fixed effects model to explain and assess the likelihood of value added erosion and its possible determinants. JEL Codes: F63; F66; D57; C23 Keynotes: Global Value Chains, value added, trade in intermediates
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