Upgrading in Global Value Chains

Erol Taymaz
Department of Economics
Middle East Technical University

13 December 2017

Outline

Globalization and value chains
Upgrading in Global Value Chains
A new method for identifying value chains
GVC metrics
- Complexity
- Upstreamness
- Specialization
Upstreamness and productivity

Globalization

Increasing integration of national economies
- A rapid increase in international trade
  - Export/GDP and Import/GDP ratios tend to increase
- A rapid increase in FDI
- A rapid increase in off-shoring (vertical FDI and out-sourcing)
Global production
- Global/international/production networks
- Global supply chains
- Global value chains (Gereffi)

Global value chains

GVC: The sequence of productive (i.e., value-added) activities leading to end use
- Encompasses all activities that are required to bring a product or service from conception to delivery to final consumers, and final disposal after use.
- Emphasizes the process of value creation, i.e., the analysis goes beyond production of goods and services.
- Incorporates spatial aspects and scales (local, national, regional and global) over the “whole-of the-supply-chain”.

Global trade (exports of goods and services), by type of TNC involvement, 2010

Source: UNCTAD, 2013: 16.

GVC participation, 1995 and 2009

Source: OECD, WTO and World Bank (2014: 14)

Domestic value added trade shares of the top 25 developing economy exporters, 2010

Source: UNCTAD (2013: 14)

Foreign value added share (foreign value added as a share of exports) indicates what part of a country’s gross exports consists of inputs that have been produced in other countries.

Domestic value added share (the share of the country’s value added incorporated in third countries gross exports) can be used as an indicator for the extent of participation in downstream activities.

GVC participation is simply the sum of foreign and domestic value added shares.