Global value chains Flashcards
What opportunity do Global Value Chains (GVCs) give?
Gives an opportunity for countries to integrate into the global economy at lower costs by producing only certain components or tasks rather than complete final products
Why countries manage to join GVCs?
Only countries that are sufficiently close to being able to produce at world standard quality and efficiency levels are able to participate
How is the GVC participation index computed?
As the sum of the share of foreign value added (backward participation) in gross exports and the share of domestic value added of indirect exports (forward participation) in gross exports
For a country that is upstream what is it likely?
Has a high value of forward participation relative to backward
For a country that is downstream what is it likely?
It is likely that it imports a lot of intermediate goods form abroad and therefore it has high backward participation
Which countries in the GVC index get a positive value?
Countries with high forward relative to backward participation record a positive value
What are the two ways that services trade in GVCs?
Services are traded directly across borders, but to a lesser extent than goods
Services are embodied in goods and are traded indirectly through them.
Example of services that are embodied in goods and are traded indirectly through them.
Domestic engineering services, logistics services or financial services that are part of the production of a car will subsequently be exported indirectly
Services offshoring
Denotes the relocation of service activities form a domestic to a foreign economy
Services offshoring therefore covers both the activities of an independent supplier and the in-house activities conducted by a foreign affiliate
What does the measure of regional intensity (RI) of exports indicate?
Provides an indication of the extent to which services offer opportunities for remote developing countries to participate in GVCs by showing whether services are traded more globally than goods
What does a RI indicator larger than 1 indicate?
That a particular industry is traded more regionally relative to overall trade
What are limitations of GVCs
It is not clear whether its results generalise from the sector or firm level to favourable development outcomes at the country level
It has not been shown whether GVC participation causes growth
It is uncertain whether development successes through GVC integration, such as for instance the experiences in East Asia, can be replicated in a similar fashion elsewhere
What is the smile curve?
Lower levels of value added in the middle stages of the vale chain
What are the 3 reasons for the smile curve?
Tasks are offshored to developing countries precisely because production costs in these countries are low relative to coordination costs
Relative market power. Easier to do, so intense competition from many countries
Internationally mobile technology mobile technology. The transfer of advanced technology to the offshore locations is now more worthwhile than in the 1970s
What does upgrading in GVCs mean?
Refers to broadening value added performed in a GVC in which integration aha already been achieved
