Servicification in global value chains: Comparative analysis of selected Asian countries with OECD

Abstract

This paper investigates the trend of servicification in global value chains (GVCs). The degree of servicification is measured as the share of service value added in manufacturing exports. Service inputs are either from domestic market or from foreign countries, which are measured by the domestic servicification and the foreign servicification, respectively. Using the international input–output tables from 1995 to 2011, we estimate the degree of servicification across 61 countries with a focus on Asian nations which have been rarely studied in previous research. We observed an evident trend of servicification in manufacturing in the Asian countries, especially in the 16 countries associated with Regional Comprehensive Economic Partnership (RCEP). Asian countries tend to have a lower level of domestic servicification but a higher level of foreign servicification than OECD countries. We also identified five key factors in driving the trend of servicification. Countries with broader participation and lower positions in GVCs tend to have higher levels of foreign servicification in manufacturing. Improvements in information and communication technology (ICT) also raise the level of foreign servicification. However, countries with a larger supply of service workers, better regulation quality and less government governance have a higher level of domestic servicification in manufacturing.

Does trade in services improve African participation in global value chains?

“…First, countries’ participation in GVCs is not measured with certainty (Casella et al, 2019; Nielsen, 2018) introducing a variable measurement bias. Second, a deeper participation in GVCs could lead to higher FDI entrance (Giroud & Mirza, 2015; Jabri et al, 2013) and greater TiS (Thangavelu et al, 2018), creating a simultaneity bias. Overall, the following variables could be endogenous: FDI inward, TiS variables and the lagged dependent variables ( LGVC t −1 ; LDVA t −1 ; LFVA t −1 ).…”

“…Some researchers identify logistics services as critical for GVCs (Arvis et al, 2016; Borchert et al, 2012; Saslavsky & Shepherd, 2014). Others point out the need for a competitive service sector because of the positive effects of cheaper services (Jones et al, 2005) and industrial servicification (Thangavelu et al, 2018), while another group suggests to lower barriers to TiS to catalyse countries’ participation in GVCs (Borchert et al, 2012; Deardorff, 2001; OECD, 2015; Van der Marel & Sáez, 2016).…”

The Role of Institutional Quality on Participation in Global Value Chains

“…However, this endeavour requires accurate regional trade and institutional quality statistics. Third, this analysis may be extended to trade in services to study the effect of institutions in service GVCs in the context of progressive economic servicification, as demonstrated by some recent studies (Miroudot & Cadestin, 2017;Thangavelu et al, 2018). Fourth, future studies may need to consider the impacts of institutional quality on trade by bringing other variables into the discussion, such as foreign direct investment or a trade restrictiveness index.…”

Firm productivity and functional specialisation

“…Sometimes, upstreamness and downstreamness measures are used in empirical applications for which they are not intended. For example, sometimes scholars aim to provide empirical content to the smile curve using estimates of upstreamness (or downstreamness), see, for example Baldwin et al (2015); Baldwin (2016); and Degain et al (2017); Thangavelu et al (2018); Deng et al (2019). The well-known 'smile curve' of global value chains originally proposed by Stan Shih of Acer in 1992 states that fabrication activities typically have the lowest remuneration relative to other activities in the chain (Mudambi, 2008;Park et al, 2013).…”