Has Global Division of Labor Increased Markup of Chinese Enterprises?

The paper calculates the number of production stages for measurement of production segmentation, and discusses and depicts the microscopic impacts and effects of production segmentation of labor division of the global value chain on enterprise markup. The DLW method is used to calculate the markup of Chinese enterprises, the fixed-effect model is used to analyze the impact of labor division of the global value chain on enterprise markup, and an instrumental variable method is constructed to relieve endogeneity. The research findings show that enterprises have significantly increased their markup by choosing global production segmentation, international production segmentation and domestic production segmentation. Global production segmentation can significantly increase the markup of low-productivity enterprises, hi-tech enterprises and private enterprises. Particularly, low-productivity enterprises choose international production segmentation and hi-tech enterprises choose domestic production segmentation. Production segmentation can offset to a certain extent low markup of export enterprises and domestic-oriented enterprises caused by the “competition effect”. In addition, enterprises’ “technological progress effect” and “trade cost effect” are two possible channels by which production segmentation facilitates the increase of markup. The paper enriches and expands the literature about the impacts of labor division of the global value chain on enterprise markup, the robustness is analyzed from the perspectives of enterprise heterogeneity, industrial & technical heterogeneity and structure, and the impact mechanism is validated through the intermediate effect model. Our important findings are of important implications for solving the “low markup trap” of Chinese enterprises and enhancing labor division of the global value chain of enterprises.