Global value chain participation and its impact on industrial upgrading

Participation in global value chains (GVCs) has become a central topic in trade and development policy. It has opened new ways to achieve industrial upgrading. However, some theoretical models suggest that not all countries will upgrade through participation in GVCs. Using panel data from the World Input-Output Database, we examine the effects of backward and forward GVC participation on three dimensions of industrial upgrading (process, product and skill upgrading). We find that backward GVC participation provides more upgrading opportunities for developing countries as it enables a less developed country to import sophisticated inputs. This activates learning through embodied knowledge. In contrast, forward participation has higher level of upgrading effect on developed countries.

Automated summary

The study found that backward participation in global value chains is more beneficial for industrial upgrading in developing countries, as it enables the import of sophisticated inputs and activates knowledge learning, while forward participation has a more pronounced upgrading effect on developed countries.