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Global Value Chains in Developing Countries: A Relational Perspective from Coffee and Garments

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  • Laura Boudreau
  • Julia Cajal-Grossi
  • Rocco Macchiavello

Abstract

There is a consensus that global value chains have aided developing countries' growth. This essay highlights the governance complexities arising from participating in such chains, drawing from lessons we have learned conducting research in the coffee and garment supply chains. Market power of international buyers can lead to inefficiently low wages, prices, quality standards, and poor working conditions. At the same time, some degree of market power might be needed to sustain long-term supply relationships that are beneficial in a world with incomplete contracts. We discuss how buyers' market power and long-term supply relationships interact and how these relationships at the export-gate could be leveraged to enhance sustainability in the domestic part of the chains. We hope that the lessons learned by combining detailed data and contextual knowledge in two specific chains—coffee and garments—have broader applicability to other global value chains.

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  • Laura Boudreau & Julia Cajal-Grossi & Rocco Macchiavello, 2023. "Global Value Chains in Developing Countries: A Relational Perspective from Coffee and Garments," Journal of Economic Perspectives, American Economic Association, vol. 37(3), pages 59-86, Summer.
    • Handle: RePEc:aea:jecper:v:37:y:2023:i:3:p:59-86
    DOI: 10.1257/jep.37.3.59
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    Cited by:

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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • L67 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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