Global Value Chains and Productivity: Micro Evidence from Estonia

By Hang T. Banh, Philippe Wingender, Cheikh A. Gueye

July 3, 2020

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Hang T. Banh, Philippe Wingender, and Cheikh A. Gueye Global Value Chains and Productivity: Micro Evidence from Estonia, (USA: International Monetary Fund, 2020) accessed September 18, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Exports, Global value chains, Globalization, Industrial productivity, International trade, Labor productivity, Production, Productivity

Keywords: Capital intensity, Dependent variable, Export firm, Exports, Firm level, Global, Global value chains, GVC buyer, GVC participation, GVC supplier, Industrial productivity, Industry level, Industry productivity growth, Labor productivity, Participation measure, Production function, Productivity, Trade, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/117
Stock No:

WPIEA2020117
ISBN:

9781513542300
ISSN:

1018-5941

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