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Wage effects of global value chains participation and position: An industry-level analysis

Author

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  • Ndubuisi, Gideon

    (UNU-MERIT, Maastricht University, and German Development Institute (DIE))

  • Owusu, Solomon

    (UNU-MERIT, Maastricht University, and German Development Institute (DIE))

Abstract

We examine how participation and positioning in global value chains (GVC) affect wages. We also examine whether this relationship is conditioned by a country's development level and labour market regulation. The results show that participation and upstream specialisation in GVCs are associated with higher wages but only in developed countries. In developing countries, while GVC participation is associated with higher wages, upstream specialisation exerts downward pressure on wages. For analysis focusing on the role of labour market regulation, we find that GVC participation only exerts a positive effect on wages under stringent labour market regulation. Under flexible labour market conditions, it exerts downward pressure on wages but allows for the effective reallocation of GVC workers into knowledge-intensive and high value added upstream activities in the value chain that are more productive and wage rewarding. Additional analysis on the effects of GVCs along the wage distribution show that participation and upstream specialisation in GVCs are associated with higher wages across all wage segments in the developed countries. In developing countries, GVC participation only benefits higher wage earners and make low-wage earners worse-off. Even when upstream specialisation is associated with lower wages across all wage segments, low wage earners are disproportionately affected.

Suggested Citation

  • Ndubuisi, Gideon & Owusu, Solomon, 2021. "Wage effects of global value chains participation and position: An industry-level analysis," MERIT Working Papers 2021-042, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2021042
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    References listed on IDEAS

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    More about this item

    Keywords

    Wages; Global Value Chain; GVC Participation; Upstream Specialisation;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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