IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/65708.html
   My bibliography  Save this paper

Global-value-chains participation and industrial upgrading in Asian developing economies

Author

Listed:
  • Taguchi, Hiroyuki
  • Lar, Ni

Abstract

Asian economies have been and will be a growth center in the world. One of the driving forces for Asian economic growth seems to be their economic integration through forming global value chains (hereafter GVCs) especially in manufacturing sectors. This chapter aims to investigate the dynamic economic impacts of GVCs participation in Asian developing economies from the following two analytical angles. Since the creation of GVCs usually involves the prevailing foreign direct investment (hereafter FDI) undertaken by transnational corporations, we first examined the impacts of FDI on the growth of GDP and exports focusing on ASEAN economies including latecomers and forerunners in their economic developments, by conducting causality tests in the vector auto-regression model. The analytical outcomes represented the clear causality from FDI to GDP and exports as well as the opposite causality from GDP and exports to FDI for a group of ASEAN economies, although individual economies has different causality relations. It implied that FDI has been a driving force for economic growth through capital accumulation and technological transfers, while FDI inflows have been attracted to the growing economies and markets. It should also be noted that the significant causality from FDI to exports might imply that the inward FDI has facilitated the GVCs participation in Asian economies. We second examined the economic impacts of GVCs participation by analyzing the value-added-trade data in Asian developing economies. We observed that the GVCs participation in manufacturing sectors has allowed the absolute domestic value added for their exports to contribute to their GDP growth. We also found that the development paths of domestic value added contributions to exports in the GVCs participating economies have followed “smile curve” with its turning point being 5,651 U.S. dollars in per capita GDP. It implied the dynamic impacts of GVCs participation, where at the initial stage of GVCs participation the domestic value added contributions to exports have reduced, but have recovered at the later stage of GVCs involvement with upgrading domestic productive capacities. It should also be noted that the turning points of “smile curves” differed according to manufacturing sectors: the sectors of food, textile, and wood products reached the turning point at lower per capita GDP and at higher ratio of domestic value added contributions to exports than those of machinery, electrical, and transport equipment.

Suggested Citation

  • Taguchi, Hiroyuki & Lar, Ni, 2015. "Global-value-chains participation and industrial upgrading in Asian developing economies," MPRA Paper 65708, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65708
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/65708/1/MPRA_paper_65708.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2014. "Tracing Value-Added and Double Counting in Gross Exports," American Economic Review, American Economic Association, vol. 104(2), pages 459-494, February.
    2. Richard E. Baldwin, 2008. "Managing The Noodle Bowl: The Fragility Of East Asian Regionalism," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 53(03), pages 449-478.
    3. Xiaohui Liu & Peter Burridge & P. J. N. Sinclair, 2002. "Relationships between economic growth, foreign direct investment and trade: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 34(11), pages 1433-1440.
    4. Ronald W. Jones & Henryk Kierzkowski, 2018. "International Trade and Agglomeration: An Alternative Framework," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 16, pages 263-279, World Scientific Publishing Co. Pte. Ltd..
    5. Fukunari KIMURA, 2006. "International Production and Distribution Networks in East Asia: Eighteen Facts, Mechanics, and Policy Implications," Asian Economic Policy Review, Japan Center for Economic Research, vol. 1(2), pages 326-344, December.
    6. Ana Cuadros & Vicente Orts & Maite Alguacil, 2004. "Openness and Growth: Re-Examining Foreign Direct Investment, Trade and Output Linkages in Latin America," Journal of Development Studies, Taylor & Francis Journals, vol. 40(4), pages 167-192.
    7. Archanun Kohpaiboon, 2003. "Foreign trade regimes and the FDI-Growth Nexus: a case study of Thailand," Journal of Development Studies, Taylor & Francis Journals, vol. 40(2), pages 55-69.
    8. Henrik Hansen & John Rand, 2006. "On the Causal Links Between FDI and Growth in Developing Countries," The World Economy, Wiley Blackwell, vol. 29(1), pages 21-41, January.
    9. Abdur Chowdhury & George Mavrotas, 2006. "FDI and Growth: What Causes What?," The World Economy, Wiley Blackwell, vol. 29(1), pages 9-19, January.
    10. Hian Teck HOON & Frank S T Hsiao & Mei-Chu Wang Hsiao, 2020. "FDI, Exports, and GDP in East and Southeast Asia — Panel Data versus Time-Series Causality Analyses," World Scientific Book Chapters, in: Development Strategies of Open Economies Cases from Emerging East and Southeast Asia, chapter 4, pages 81-129, World Scientific Publishing Co. Pte. Ltd..
    11. Joonkoo Lee & Gary Gereffi, 2013. "The co-evolution of concentration in mobile phone global value chains and its impact on social upgrading in developing countries," Global Development Institute Working Paper Series ctg-2013-25, GDI, The University of Manchester.
    12. Baldwin, Richard, 2012. "Global supply chains: Why they emerged, why they matter, and where they are going," CEPR Discussion Papers 9103, C.E.P.R. Discussion Papers.
    13. Khalid Nadvi & John T. Thoburn & Bui Tat Thang & Nguyen Thi Thanh Ha & Nguyen Thi Hoa & Dao Hong Le & Enrique Blanco De Armas, 2004. "Vietnam in the global garment and textile value chain: impacts on firms and workers," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(1), pages 111-123.
    14. Mohsin Hasnain Ahmad & Shaista Alam & Mohammad Sabihuddin Butt, 2003. "Foreign Direct Investment, Exports, and Domestic Output in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 42(4), pages 715-723.
    15. K. De Backer, 2011. "Global Value Chains: Evidence, Impacts and Policy Issues," Review of Business and Economic Literature, Intersentia, vol. 0(2), pages 110-128, June.
    16. K. De Backer, 2011. "Global Value Chains: Evidence, Impacts and Policy Issues," Review of Business and Economic Literature, Intersentia, vol. 56(2), pages 110-128, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hiroyuki Taguchi, 2014. "Dynamic Impacts of Global Value Chains Participation on Asian Developing Economies," Foreign Trade Review, , vol. 49(4), pages 313-326, November.
    2. Taguchi, Hiroyuki & Lar, Ni, 2015. "FDI, industrial upgrading and economic corridor in Myanmar," MPRA Paper 64411, University Library of Munich, Germany.
    3. Taguchi, Hiroyuki, 2018. "The involvement in global value chains and its policy implication in Vietnam," MPRA Paper 84367, University Library of Munich, Germany.
    4. Hian Teck HOON & Frank S T Hsiao & Mei-Chu Wang Hsiao, 2020. "FDI, Exports, and GDP in East and Southeast Asia — Panel Data versus Time-Series Causality Analyses," World Scientific Book Chapters, in: Development Strategies of Open Economies Cases from Emerging East and Southeast Asia, chapter 4, pages 81-129, World Scientific Publishing Co. Pte. Ltd..
    5. Sergio Castello & Anindya Biswas, 2021. "Foreign Direct Investment, Exports and Long-term Economic Growth in Alabama: A Co-integration Analysis," Arthaniti: Journal of Economic Theory and Practice, , vol. 20(1), pages 86-94, June.
    6. Taguchi, Hiroyuki & Murofushi, Harutaka, 2014. "International production networks in ASEAN economies," MPRA Paper 64409, University Library of Munich, Germany.
    7. Yongkul Won & Frank S.T. Hsiao & Doo Yong Yang, 2008. "FDI Inflows, Exports and Economic Growth in First and Second Generation ANIEs : Panel Data Causality Analyses," Trade Working Papers 21939, East Asian Bureau of Economic Research.
    8. Taguchi, Hiroyuki & Pham, Son Duong, 2019. "Domestic Value Creation in the Involvement in Global Value Chains in Asian Economies: Role of Supporting Industries," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(10), pages 1184-1199, October.
    9. Hiroyuki Taguchi & Jun Zhao, 2022. "China's global value chain linkage and logistics performances in emerging ASEAN economies," International Studies of Economics, John Wiley & Sons, vol. 17(2), pages 126-155, July.
    10. Bhavesh Garg & Pravakar Sahoo, 2021. "DO DIFFERENT TYPES OF CAPITAL INFLOWS HAVE DIFFERENTIAL IMPACT ON OUTPUT? Evidence from Time series and Panel Analysis," IEG Working Papers 443, Institute of Economic Growth.
    11. Dierk Herzer & Stephan Klasen & Felicitas Nowak-Lehmann D., 2006. "In search of FDI-led growth in developing countries," Ibero America Institute for Econ. Research (IAI) Discussion Papers 150, Ibero-America Institute for Economic Research.
    12. Herzer, Dierk & Klasen, Stephan & Nowak-Lehmann D., Felicitas, 2008. "In search of FDI-led growth in developing countries: The way forward," Economic Modelling, Elsevier, vol. 25(5), pages 793-810, September.
    13. Taguchi, Hiroyuki, 2018. "Domestic value creation in global value chains in Asian economies," MPRA Paper 89741, University Library of Munich, Germany.
    14. Nguyen, Dao Thi Hong & Sun, Sizhong & Anwar, Sajid, 2017. "A long-run and short-run analysis of the macroeconomic interrelationships in Vietnam," Economic Analysis and Policy, Elsevier, vol. 54(C), pages 15-25.
    15. Hiroyuki Taguchi & Ni Lar, 2015. "Fragmentation And Trade Of Machinery Parts And Components In Mekong Region," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 60(05), pages 1-21, December.
    16. Kose,Ayhan & Ohnsorge,Franziska Lieselotte & Ye,Lei Sandy & Islamaj,Ergys, 2017. "Weakness in investment growth : causes, implications and policy responses," Policy Research Working Paper Series 7990, The World Bank.
    17. Tekin, Rıfat Barış, 2012. "Economic growth, exports and foreign direct investment in Least Developed Countries: A panel Granger causality analysis," Economic Modelling, Elsevier, vol. 29(3), pages 868-878.
    18. Vinish Kathuria, 2019. "Growth and Investment: Testing for the Relationship for South Asian Countries," Millennial Asia, , vol. 10(3), pages 337-371, December.
    19. Abdullaev Elbek Erkin Ugli, 2023. "Global Value Chains’ Participation and Logistics Performance in Post-Soviet Economies," Bulletin of Applied Economics, Risk Market Journals, vol. 10(1), pages 81-101.
    20. Radovan Kastratović, 2020. "The impact of foreign direct investment on host country exports: A meta‐analysis," The World Economy, Wiley Blackwell, vol. 43(12), pages 3142-3183, December.

    More about this item

    Keywords

    Global value chains; industrial upgrading; Asian developing economies;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:65708. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.