Position in global value chains and wages in Central and Eastern European countries

Abstract

This paper examines the relationship between the relative position of industries in Global Value Chains (GVC) and wages in 10 Central and Eastern European countries. We combine GVC measures of global import intensity of production, upstreamness and the length of the value chain with micro-data on workers. We find that the wages of Central and Eastern European countries workers are higher when their industry is at the beginning of the chain or at the end than in the middle. Secondly, wage changes depend on the interplay between upstreamness and GVC intensity. In sectors close to final demand, greater production fragmentation is associated with lower wages.

Productivity and wage effects of firm‐level upstreamness: Evidence from Belgian linked panel data

“…The GMM‐SYS method has been widely used in the literature to examine the consequences of worker and firm characteristics on firm/industry‐level productivity and wages (e.g. Cardoso et al, 2011; Garnero et al, 2014; Nielen & Schiersch, 2014; Szymczak et al, 2019). However, as it relies on internal instruments (i.e.…”

“…The null hypothesis is that the instruments are weak. According to the standard 'rule of thumb', weak identification is problematic for F statistics smaller than 10 (as suggested by van Ours and Stoeldraijer (2011)).…”

“…This approach is standard in the literature on firm-level determinants of productivity and wages (e.g. Buhai et al, 2017;Göbel & Zwick, 2012;van Ours & Stoeldraijer, 2011). It boils down to simultaneously estimating a system of two equations (one in levels and one in first differences) and relying on internal instruments to control for endogeneity.…”

Working Conditions in Global Value Chains: Evidence for European Employees

“…The first one is the index of global import intensity of production (GII) proposed by Timmer et al (2016), which counts imports of goods and services from all stages of production, thus traces the entire value chain, whereas the classic gauges of offshoring or such GVC measures as the share of foreign value added typically count the final stage of production only. Most recently, GII has been used by Szymczak et al (2019). 14 The index ranges from 0 to 1; values closer to 1 indicate greater dependence of domestic sectors on foreign inputs (hence greater GVC involvement).…”

Trade, GVCs, and wage inequality: Theoretical and empirical insights

“…The need for such a focus is emphasized by Shen and Silva (2018), who find the effects of an increase in U.S. exposure to value-added exports from China on average wages and unemployment levels to depend upon the position of the Chinese industry in the global value. In a recent paper, using data on Central and Eastern European countries, Szymczak et al (2019) examine the effect of industries' upstreamness on workers' wages. Their results show that workers earn higher wages when employed in industries located either at the beginning or at the end of the value chain.…”