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Value-Added Erosion in Global Value Chains: An Empirical Assessment

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  • José G. Caraballo
  • Xiao Jiang

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.

Suggested Citation

  • José G. Caraballo & Xiao Jiang, 2016. "Value-Added Erosion in Global Value Chains: An Empirical Assessment," Journal of Economic Issues, Taylor & Francis Journals, vol. 50(1), pages 288-296, January.
    • Handle: RePEc:mes:jeciss:v:50:y:2016:i:1:p:288-296
    DOI: 10.1080/00213624.2016.1148991
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    Cited by:

    1. Biswajit Banerjee & Juraj Zeman, 2020. "Determinants of Global Value Chain Participation: Cross-country Analysis," Working and Discussion Papers WP 1/2020, Research Department, National Bank of Slovakia.
    2. Xiang Gao & Geoffrey J D Hewings & Cuihong Yang, 2022. "Offshore, re-shore, re-offshore: what happened to global manufacturing location between 2007 and 2014? [The gravity model]," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 15(2), pages 183-206.
    3. Ingrid Harvold Kvangraven, 2021. "Beyond the Stereotype: Restating the Relevance of the Dependency Research Programme," Development and Change, International Institute of Social Studies, vol. 52(1), pages 76-112, January.
    4. Mold, Andrew & Munyegera, Kasim Ggombe & Mukwaya, Rodgers, 2022. "What Trade-in-Value added databases tell us about Continental Integration – and what it means for the AfCFTA," Conference papers 333505, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Guy Roland Assamoi & Shaoyuan Wang & Yobouet Thierry Bienvenu Gnangoin & Akadje Jean Roland Edjoukou, 2019. "Foreign Inputs and Changes in Domestic Value Added Exports: Empirical Evidence from Latin American Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 9(3), pages 244-251.
    6. Biswajit Banerjee & Juraj Zeman, 2022. "Determinants of global value chain participation: cross-country analysis," Indian Economic Review, Springer, vol. 57(1), pages 59-95, June.
    7. Joao‐Pedro Ferreira & Pedro Ramos & Eduardo Barata & Christa Court & Luís Cruz, 2021. "The impact of COVID‐19 on global value chains: Disruption in nonessential goods production," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(S1), pages 32-54, November.
    8. Antonello Zanfei & Andrea Coveri & Mario Pianta, 2019. "FDI Patterns and Global Value Chains in the Digital Economy," Working Papers 1903, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2019.
    9. Lu, Yuxin & Sica, Edgardo & Wolszczak-Derlacz, Joanna, 2024. "Global value chains, wages, employment and labour production in China: A regional approach," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 124-142.
    10. Truong Quang Hoan & Dong Van Chung & Nguyen Huy Hoang, 2019. "Taiwan–ASEAN Trade Relations: Trade Structure and Trade in Value Added," China Report, , vol. 55(2), pages 102-124, May.
    11. Lukas Schlogl, 2020. "Leapfrogging into the unknown: The future of structural change in the developing world," WIDER Working Paper Series wp-2020-25, World Institute for Development Economic Research (UNU-WIDER).

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