New insights on the relationship between the involvement of countries in global value chains, and intra- and inter-country inequalities

Recent economic growth cannot be understood without considering the emergence of Global Value Chains (GVCs). However, recent literature has highlighted that economic upgrading cannot be taken as a granted result of the involvement in GVCs, and it does not necessarily lead to positive social outcomes. We explore whether the recent performance of countries in the GVCs has significantly conditioned the intra- and inter-country inequalities. Using a combined multisectoral-multiregional (MRIO) and econometric approach, we analyze 67 countries during 1995-2018. Regarding involvement in GVCs, we look into smile curves, in reference to the quadratic relation between position and inequality. The results show different geographical patterns. For intracountry inequality, we find significant smile curves in Developed, African, Latin American, and Asian countries, so these can reduce internal inequalities by moving to intermediate positions in GVCs. For inter-country inequality, results suggest opportunities for catching-up in Latin America and Africa by specializing in the tails.

Automated summary

This study examines the impact of countries' participation in global value chains on domestic and international inequality. The findings suggest that intermediate positions in GVCs can reduce intra-country inequality, while focusing on the tails presents opportunities for catching-up in Latin America and Africa.