Intra-country inequality and involvement in GVCs: the case of EU-28

Abstract

Nowadays, production is configured around Global Value Chains, and countries’ involvement in those has become important objectives for achieving economic upgrading. However, social outcomes are neither equally distributed between countries, nor among social classes within countries. Indeed, GVCs and the potential gains of countries' involvement in them, yield uncertain implications of the effects of globalization on inequality within countries. In this context, the aim of this work is to analyze the link between the performance of countries in GVCs (measured trough participation and position) and the levels of intra-country inequality. In more depth, we focus on Europe (specifically, EU28 countries), as it offers a wide and cohesive scenario of developed countries in which to test the effects of linking into GVCs on internal inequalities. We get a positive effect of participation in GVCs on increasing intra-country inequality, while more upstream positions are linked to decreases in income inequality. Besides, if we differentiate by geographical area, Western and Southern European countries would achieve higher reductions in inequality than Northern countries by moving towards more upstream positions.