The value‐added creation effect of industry position in global value chains: implications for Asia‐Pacific economies

Abstract

We analyse the value‐added creation effect of global value chain (GVC) participation activities of APEC member economies, using a fixed‐effects regression model analysis based on country–industry data from Organisation for Economic Co‐operation and Development (OECD) Inter‐country Input–Output Tables. We find that forward participation in GVCs is more desirable than backward participation for creating domestic value‐added and that the industry position in the middle stages of the production line creates higher domestic value‐added per output unit. These results hold regardless of the application of standard Ordinary Least Squares (OLS) or fractional logit for panel data and of the characteristics of the interconnected countries in GVCs (APEC member vs. non‐APEC member economies, Asian APEC vs. non‐Asian APEC members, developed vs. developing countries). This implies that the conventional firm‐ or product‐specific U‐shaped ‘smile curve hypothesis’ is not applicable at the economy‐wide, country–industry level. This finding suggests that depending on the product type, manufacturing industries can be a major driving force for less‐developed APEC member economies to climb the development ladder. Since GVC participation gains are diversified across industries and upgrading country–industry positions in GVCs are challenging for APEC member economies, we strongly recommend that they construct effective domestic value chains and coordinate with other members while upgrading their GVC participation.

Can talent policy promote firm innovation: An empirical analysis from solar photovoltaic industry in China

“…The progress of technology will replace the production and more repetitive work with low technology content, will require more professional technicians and R&D personnel (Haini, 2019). Furthermore, according to the smile curve theory, high added value can be generated in the field of technology and sales, while the lowest added value can be generated in the field of production and manufacturing (Park and Park, 2021). Therefore, the concentration of firms' employees with high added value is the performance of the advanced human capital, which is reflected in the improvement of the function structure of human capital.…”

Firm size‐specific trade effects of regional trade agreements: Estimating extensive and intensive margins of trade

“…The Korean Government together with related private and public institutions are actively initiating to raise the utilization rates of RTAs by providing necessary information via both online and offline. For example, several comprehensive FTA portal sites are operating by Korea International Trade Association (KITA, okfta.kita.net and tradenavi.or.kr) Note: See Park and Park (2021) for GVC upstreamness and participation rates. The products highlighted in bold and italic signify a higher than average level of GVC participation rates or upstream position.…”

Immigrant Diversity, Institutional Quality, and GVC Position

“…Inter-group discrimination can cause social conflicts that can have a negative impact on economic performance [40][41][42]. Accordingly, social identity behaviors (e.g., diversity of languages, beliefs, and culture) involving immigrants can also increase social conflicts [5,20], which can have a negative impact on the GVC position of destination countries. Three explanations can be provided for this.…”

“…We argue that immigrant diversity affects the GVC position of destination countries through the capability pool effect and social conflict effect. The former effect is positive, while the latter is negative [19,20]. Thus, the overall effect of immigrant diversity on the GVC position can be either positive or negative (and may even be zero).…”