Value-Added Erosion in Global Value Chains: An Empirical Assessment. Issue 1 (2nd January 2016)

• Record Type: Journal Article
• Authors: Caraballo, José G.; Jiang, Xiao
• Is Part Of: Journal of economic issues. Volume 50:Issue 1(2016)
• Page Start: 288
• Page End: 296
• Publication Date: 2016-01-02
• Subjects: global value chains -- trade in intermediates -- value-added; C23 -- D57 -- F63 -- F66; Economics -- Periodicals; Economics; Économie politique -- Périodiques; Economie; ECONOMICS; ECONOMIC POLICY; Periodicals; 330.05
• DOI: 10.1080/00213624.2016.1148991
• Languages: English
• ISSNs: 0021-3624

Abstract

Abstract: In the period from 1995 to 2008, many countries experienced what we call the "value-added erosion." It describes the decline in the sectoral 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 the 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 — the domestic value-added share in exports and foreign high-skill labor embodied in a country's exports (a proxy for foreign lead firms' high value-adding activities) — are estimated using a multi-regional global input-output model. Using these results and other control variables, we apply a panel cointegration model to explain and assess the likelihood of value-added erosion and its possible determinants.