Prices of Value Added and Competitiveness in Global Value Chains

Measuring international competitiveness is a highly contested issue in contemporary economics. The emergence of global value chains limits the accuracy of traditional export-based measures and calls for the employment of techniques capable of accounting for value added input of individual economies into global production and trade. The paper aims to contribute to the global value chains literature by developing a framework both for distinguishing diverse modes of competitiveness and for the identification of successful cases of upgrading. It adapts an established method of export price comparisons to the context of global value chains and proposed a bi-dimensional technique based on the dynamics of the volumes and prices of GVC Income. As it concerns the technical side of the paper, it takes advantage of an input-output analysis and additive decomposition technique in order to disentangle the value-added-based measure of GVC Income, as well as the prices and volumes components of its dynamics. Empirical analysis, based on World Input-Output Database, demonstrates that countries differ significantly not only in terms of total GVC income dynamics, but also in terms of the modes chosen to build their competitive position in the global economy. In particular, upgrading throughout the period was achieved only by a few Central, Eastern European and emerging countries. The chances of successfully upgrading changed drastically in time, with the stage of the global business cycle and the balance between global demand and supply. In particular, catching-up possibilities by upgrading, strong in early 2000’s, decreased significantly after the Economic Crisis. The key reason, next to weak demand, that stands behind these developments is the impressive expansion of China, which has been on an upgrading path since 2005.