Institutional Change in Value Chains: Evidence from Tea in Nepal

Agriculture, food and global value chains: issues, methods and challenges

Economic globalization creates new opportunities for countries to develop and achieve high rates of economic growth through participation in global value chains. However, many countries, especially developing ones, face economic difficulties due to weak involvement in global value chains and low prospects for moving from the least profitable to more profitable links of the chains. The relevance of the study lies in the need to assess the nature of Russia's participation in global value chains in high-tech sectors in order to understand the prospects for improving the position of Russian companies in the global production system, ensuring a technological breakthrough and sovereignty. In this study, based on the concept of the "smile curve" of global value chains and the ADB MRIO input-output tables for 2000, 2011 and 2021 for 63 countries and 35 industries, an assessment of the nature of participation of companies in high-tech sectors of the Russian economy in global value chains is given for the first time. The distribution of added value for Russian global value chains takes the form of a "smile curve". At the same time, the main beneficiaries of the added value in such chains are domestic service companies. The theoretical significance of the work is due to the original knowledge about the specifics of the involvement of high-tech sectors of Russia in global production, as well as the features of its spatial organization (by identifying key foreign partners) and the transformation of participation in global value chains over the studied period of time. The practical significance of the study primarily comes from the data obtained on the contribution of foreign partners and Russian sectors of the economy to intra- and inter-industry trade in the studied sectors. This made it possible to decompose the studied sector in terms of added value from the point of view of foreign and national final and intermediate products, as well as from the point of view of foreign and national added values.

The article is devoted to the generalization and systematization of the main theoretical approaches and practical methods of measuring the participation of countries or industries in global value chains (GVC). The work provides the definition and main content of global value chains. It has been noted that the growing role of global value chains and their importance not only changes the approach to the ways of generating income and ensuring economic growth, but also gives an awareness that the most important driver of economic growth of an industry or country is direct participation in global value chains. Significant arguments have been presented in favor of the participation of countries in global value chains. Summarizing the existing methods of calculating the degree of a country’s participation in global value chains, the authors have singled out four index based methods: Index of Vertical Specialization, Export complexity index, GVC participation index and GVC position index. Index of Vertical Specialization assumes using data on the country’s expenditure-output for the distribution of the value of imported foreign goods contained in export products of a certain industry in this country, on the total export value of the industry. Export complexity index based on export volume and income of a country that participates in global value chains, as well as the export of goods of a specific country and the industry index of goods to measure the national product index. GVC participation index is measured in terms of the value of goods and services added as a result of trade. GVC position index shows the “status” of a certain industry in a country: the higher the value, the higher the “status” of a certain industry in the country’s global value chain, and vice versa. The main formulas for calculating indices, advantages and disadvantages of their use have been presented. Thus, it has been proven that the GVC participation index, which is based on the Index of Vertical Specialization, reflects the dynamics of the integration of countries in the GVC and allows for inter-country and inter-industry comparative analysis, but does not provide an opportunity to assess the benefits received from participation in the GVC. The use of the GVC Status Index allows to solve this task both at the country and at the sectoral level. It has been proposed to use GVC participation index and GVC position index as a basis for analyzing Ukraine’s participation in global value chains. This will allow not only to reveal the degree of Ukraine’s participation in the modern international division of labor but also, based on the conclusions of such an analysis, to develop recommendations for improving the place of Ukraine in the GVC and change the position of Ukraine from a raw material supplier country to a raw material processing country.

The article dissects the relevant trends characterizing the large EU economies participation in global value chains. The response reactions of large European economies’ participation in manufacturing global value chains to the Global Financial crisis are analyzed. This crisis has been chosen for the analysis owing to several reasons related to the economic nature of the crisis and statistics availability. In the paper three parameters of countries’ participation in value chains – sustainability, adaptivity, and self-sufficiency – have been examined. As a result, it has been revealed that the response reaction to the 2008–2009 crisis uncovered an inadequate sustainability of large European economies’ participation in manufacturing value chains. However, all the countries (namely, Germany, Italy, and France) have demonstrated serious adaptability and self-sufficiency during the crisis. At the same time, the latest crisis challenges the positive role of this adaptation in relation to the current conditions. This way, sustainability and self-sufficiency attributes require further verification with an account of the latest crisis specifics.

Global value chain (GVC) participation has played a significant role in boosting the trade gains of both developed and developing seafood-exporting countries over the past three decades. In addition, the extent of GVC participation has become the most important platform for addressing gains from trade in developing seafood-exporting countries to ensure that their participation enhances economic growth. Recent studies on GVC participation in developing countries have highlighted the importance of domestic institutions. However, the literature is silent on the quality of the domestic institutions–GVC participation nexus. This paper aims to investigate the determinants of GVC participation and the effect of the quality of domestic institutional governance on seafood-exporting developing countries’ GVC participation indices. Using the Hausman–Taylor (HT) estimator and the system generalised method of moments (GMM) dynamic panel data methodology to examine seafood export data from 32 countries from 2009 to 2018, we find that economic potential drives backward GVC participation, while low forward participation might not only lead to lower gains from trade, but also limit countries to the supply of primary seafood products with little value addition. In addition, the quality of domestic institutional governance constrains GVC participation. Overall the results indicate that the quality of domestic institutional governance matters for the GVC participation of seafood-exporting developing countries.

This paper examines the changing patterns of transnational value chains in the Asia-Pacific region. The methodology is based on the analysis of data extracted from the OECD – WTO Trade in Value Added Database (2016). The study demonstrates that 1) Asia-Pacific countries show extremely high involvement in the global value chains; 2) intra-Asian value chains develop at a fast pace, reflecting the trend towards regiona-lization of economic ties in Asia-Pacific (caused by the processes of transformation within China, the growing income divergence in the region and the development of regional integration mechanisms); 3) the level of participation in global value chains differs across countries and is subject to constant changes. In particular, Chinese manufacturers are moving to the processes with higher value added, and the role of an ‘assembly shop’ in the region is shifting to the ASEAN countries. Russia’s participation in the value chains in the Asia-Pacific region is currently limited to its role as a supplier of raw materials. High tariffs make manufacturing oriented towards Asia less viable, especially considering that most of Asia-Pacific countries have free trade agreements with each other. However, favorable rules of origin in Asian RTAs as well as good political relations with leading Asian countries in conditions of tensions between them still create some opportunities for involving Russia in regional value chains at the more advanced stages

Trade and participation in global value chains can play a key role in economic diversification and development. This paper deepens the discussion about productivity growth and upgrading in agriculture in Africa, and the role of national, regional, and international value chains in supporting such structural change. The analysis in this report is based on quantitative and qualitative surveys undertaken in 2016 in Ghana, Kenya, and Zambia, where 3,935 farmers, 60 aggregators, and 56 buyers in the maize, cassava, and sorghum value chains were interviewed in the three countries. The descriptive results show that farmers who were on a contract saw greater structural transformation; higher output; and better access to seeds, fertilizers, pesticides, technology, and extension services compared with farmers who were not on a contract. To identify more robustly the link between value chain participation and contract farming with productivity and upgrading, the paper looks at the relationship using a variety of empirical methodologies, ranging from ordinary least squares and probit regressions to propensity score matching. Based on the empirical evidence, the hypothesis that value chain participation leads to structural transformation cannot be confirmed. The paper does find evidence that formal or informal contractual arrangements that regulate the provision of inputs to production, such as fertilizer, technology, extension services, and market information, positively affect upgrading. It remains nevertheless important to understand the impact of government policies on the emergence of value chains given that value chains support contractual arrangements.

This study investigates the impacts of the global value chain (GVC) participation on conflicts across nations. The first novelty of this study is to observe the impacts of GVC participation on conflicts. In other words, the trade statistics are not conventional, but they track true domestic value-added embedded in exports and true foreign value-added embedded in imports, which provides a more accurate way to measure trade values. Secondly, the comprehensive data set enables us to include 188 countries and to conduct disaggregated analysis via the heterogeneity across sectors. The findings indicate that bilateral GVC participation has a significantly negative impact on the number of conflicts regardless of sector groups. The multilateral GVC participation of manufacturing and service sectors also decreases the number of conflicts across the countries. In other words, greater GVC activities can foster economic interdependence and peace because countries with close economic relations are less likely to wage war on one another due to the associated costs. Moreover, GVC participation may allow countries to access resources that are not available domestically. Therefore, trade can alleviate a potential cause of conflict. Regarding control variables, membership in the GATT, distance, common language, and polity measures are negatively associated with the number of conflicts whereas contiguity, common border, landlocked, and common colony are positively correlated with the number of conflicts. The findings are quite robust to a couple of robustness checks: different dependent variables, different samples, and 5-year (moving) averages. Therefore, we can argue that enlarging and deepening world trade negotiations and policies emphasizing peace might help to decrease tensions.

Engagement in the global division of labor has greatly influenced China’s economy and environment. With the multi-regional input–output (MRIO) framework, we calculate the global value chain (GVC) participation index of China’s 16 manufacturing sectors. We also measure the green upgrade index of manufacturing sectors based on the super-efficiency epsilon-based measure (SEBM) and the Malmquist–Luenberger (ML) index. In addition, the effect of GVC participation on the green upgrade of manufacturing sectors is empirically tested with a fixed effects regression model for panel data. Results show that: (1) sectors that rank high in the forward linkage-based GVC participation index also tend to rank high in the backward linkage-based GVC participation index; (2) the ML index is greater than 1 in most years, indicating that the green upgrade of China’s manufacturing sectors shows an uptrend; (3) for both forward and backward linkage, the rise of the GVC and complex GVC participation indexes significantly promotes the green upgrade of manufacturing sectors. Finally, GVC participation of China’s manufacturing sectors promotes green upgrade mainly through green technology progress. The conclusions have empirical evidence and policy implications for the advancement to medium- and high-end GVC participation and the green transition of China’s manufacturing sectors.

Recent decades have witnessed an increasing integration of developing countries into global value chains (GVCs). This growing participation in global production sharing has raised hopes for economic upgrading within such value chains. However, globalization has intensified international competition, and achieving economic upgrading is not an easy task. Moreover, the social consequences of participating in GVCs are not always positive; however, they have received considerably less attention in the literature. This paper suggests a simple and parsimonious approach to measuring economic and social upgrading (and downgrading) in GVCs. Applying this parsimonious methodology and using quantitative secondary data, we analyze how widespread upgrading has been in four selected manufacturing GVCs: apparel, wood furniture, automotive, and mobile phones. We also investigate to what extent downgrading is part of the reality and undertake a comparative analysis across GVCs, regions and country groups (developing vs. developed countries). We find that the promise of industrial upgrading through participation in GVCs does not materialize for everyone. Indeed, economic upgrading has taken place in just over a quarter of the countries in our sample, among them mainly developing countries. Finally, we examine the relationship between economic performance and social performance in the different GVCs to investigate whether or not economic upgrading is typically associated with social upgrading. While patterns differ across GVCs, we find that economic upgrading is more likely to occur simultaneously with social upgrading than without, and vice versa. Our analysis, thus, suggests that economic upgrading is conducive to, but not sufficient for, social upgrading to occur.

Based on firm- and customs transaction-level data from 2000 to 2006, this study employs the translog cost function to measure the capacity utilization of Chinese firms. It then uses a difference-in-differences (DID) model combined with propensity score matching (PSM) to examine the impact of global value chain (GVC) participation on capacity utilization. The empirical results show that GVC participation has a significant positive impact on firm capacity utilization and that this impact lasts for a long time. Our results are robust after considering several potential problems. Mechanism testing reveals that GVC participation improves firm capacity utilization by expanding market demand and promoting technological progress. Heterogeneity analysis shows that GVC participation has a more significant impact on general trade firms, private firms, high-tech industry firms and firms in the western region of China. This study reveals that GVC participation can effectively ameliorate China's overcapacity, providing new ideas for achieving overcapacity governance.

With increasing refinement in production, advancements in information technology, and optimized transport, enterprise value chains have become global. This international division of labor based on Global Value Chains (GVCs) has driven economic growth but also caused issues like income disparity and status inequality. Developed countries aim to maintain dominance in GVCs, while developing countries seek greater participation and advancement within them. For developing nations, breaking the “low-end lock” in GVCs is crucial. This paper empirically examines the complex relationship between digital trade and global value chain reconstruction, and explores the moderating effect of institutional environmental factors on the above relationships. This enriches the research perspective and expands the research at the intersection of digital trade and value chain. Findings suggest that digital trade affects China’s position and participation in global value chains, with institutional quality and economic freedom moderating these effects. This research contributes to understanding the complex dynamics of digital trade and value chain reconstruction, highlighting China’s potential to ascend the global value chain through digital trade development.

The global and domestic divisions of labor have had a great influence on the economy and environment in China during the last decade. With the refinement of production processes, national value chains (NVCs) coexist with global value chains (GVCs), enabling regions to participate in dual value chains (DVCs) simultaneously. This study calculates the NVCs and GVCs participation of manufacturing sectors in China’s provinces. On this basis, this research adopts a fixed effects model to analyze the impact of GVCs and NVCs participation and their interaction effect on manufacturing upgrades and green development. The results show, first, that significant regional differences in GVCs participation exist among provinces in China. In comparison, provincial NVCs participation demonstrates fewer regional differences. Second, there are significant sectoral differences of GVCs participation in China’s manufacturing industry—high-tech manufacturing is more embedded than other manufacturing industries. The sectoral differences in NVCs participation are relatively small. Third, GVCs and NVCs participation and their interaction effect have significantly promoted the upgrading and green development of manufacturing sectors in provinces of China, and this impact exhibits significant heterogeneity across regions, industries, and NVCs participation modes. The conclusions of this study provide empirical evidence and policy recommendations for the upgrading and green development of China’s manufacturing industry.

Subject and purpose of work East Asia, particularly China, Japan, and South Korea has experienced rapid economic growth in recent decades, partly through active participation in global value chains (GVCs). Foreign direct investment (FDI) has played a crucial role in this process, enabling the transfer of technology and skills and access to international markets. This paper aims to empirically analyse the effects of FDI on GVCs in East Asian countries over the last two decades. Materials and methods The paper covers six East Asian countries from 2000 to 2022 and explores the relationship between FDI and GVCs using the Driscoll and Kraay (1998) estimator. The estimation techniques are ordinary least squares (OLS) and feasible generalized least squares (FGLS). Results The results reveal that FDI inflows into East Asia positively and significantly affect the countries participation in GVCs, both upstream and downstream. Conclusions These results suggest the need to support FDI in Asian countries to improve their participation in GVCs.

The study investigated GVC and exchange rate comovements from 1990 to 2018.The study employed a continuous wavelet coherence procedure to investigate the timefrequency dependence of global value chain (GVC) participation and exchange rates relationship in Africa.We find from the study that there is interdependency between exchange rates and global value chain participation only in the very short term for all selected countries.The study finds interdependent and well-governed networks continue to experience muted effects of exchange rate effects on GVC participation while independent firms in countries participating in GVC forward integration are negatively impacted.