Trade for catch-up: examining how global value chains participation affects productive efficiency

Abstract

A substantial part of production and trade now takes place through global value chains (GVC), making it an essential conduit of knowledge spillover and technology transfer. Yet, extant studies examining how countries become productively efficient and catch-up to the global efficiency frontier through international trade have ignored the possible role of GVC in fast-tracking this process. This paper provides the first empirical evidence that fills this knowledge gap. We propose a two-stage empirical strategy to this end. First, we use a data envelopment analysis (DEA) approach to compute a measure of productive efficiency—defined herewith as a country’s relative productive efficiency to the global productive efficiency frontier. Second, we use the productive efficiency index as an outcome variable in a reduced-form equation that controls for GVC participation and its interaction with country characteristics that influence the gains from GVC participation. In addition to using the panel fixed effect method, we estimate the reduced-form equation with the difference-GMM to address endogeneity issues, and the Tobit and Fractional Response models to address the bounded nature of the productive efficiency index. We find strong evidence suggesting that GVC participation enables technology-lagging countries to become more productively efficient as well as catch-up to the global efficiency frontier. We also find that the productive efficiency and catch-up gains from GVC participation accrue more strongly to countries that have a high human capital stock, a well-functioning financial market, maintain stable macroeconomic conditions, and specialize in downstream activities in the value chain.

Evaluating the technical efficiency of Saudi Arabian telecommunications companies using window DEA and AHP techniques

“…In this study, the “ production approach ” in financial institutions (Phan et al , 2018; Degl’Innocenti et al , 2017; Shawtari et al , 2015) was considered to select the most adequate set of inputs and outputs for the telecommunications companies (Wanke and Barros, 2016). As suggested in previous studies (Ndubuisi and Owusu, 2023; Ndubuisi et al , 2022), the DEA model we deployed assumed that two outputs were produced by three inputs. Broadly, from a production perspective, telecommunications companies are viewed as firms that generate sales revenues using their assets.…”

“…Similar to Oredegbe and Zhang (2020), Giokas and Pentzaropoulos (2008) conducted a study on 30 countries. Recent studies (Ndubuisi et al, 2022;Ndubuisi and Owusu, 2023;Ndubuisi et al, 2021) in the telecommunications industry have confirmed that the envisaged relationship between ICTs capabilities and technical efficiency is conditioned by a country's characteristics, such as levels of education, institutional quality and macroeconomic conditions, as captured by the inflation rate.…”

“…Telecommunications infrastructure is among the enormous driving forces of a country’s economy, and it requires massive investments (Goyal and Dutta, 2021). The importance of information and communications technology(s) (ICTs) for growth lies not only in its direct impact but also in the implicit mechanism through which it affects economic growth and improves technical efficiency (Ndubuisi et al , 2022; Ndubuisi and Owusu, 2023). It entails basic amenities and facilities provided to serve society by improving the living standards of people through education, providing better health-care facilities and convenient transportation, energy and communications systems (Goyal and Dutta, 2021; AL-Aklabi and Al-Allak, 2011).…”

Reexamining the Impact of Global Value Chain Participation on Regional Economic Growth: New Evidence Based on a Nonlinear Model and Spatial Spillover Effects with Panel Data from Chinese Cities

“…Countries in the early stages of development are located far from the technological frontier, and they have more room to benefit from knowledge transfers or spillover effects via GVC participation. Thus, they are able to 'catch up' with the global efficiency frontier [42]. Using a panel estimation covering 47 countries and 13 manufacturing sectors from 1995 to 2011, Urata (2020) notes that developing countries benefit more from improved productivity when they source intermediate goods from advanced countries and engage in backward GVC participation [43].…”

At the territorial roots of global processes: Heterogeneous modes of regional involvement in Global Value Chains

“…In the first phase of GVCs emergence, dating approximately until the 2008 economic crisis, the literature mostly pointed to the apparently globally widespread benefits of GVCs involvement. In developing countries, the involvement in GVCs gave access to new productive and technological capabilities, raising productivity and leading to economic and social upgrading (Ndubuisi and Owusu, 2023; Pahl and Timmer, 2020). In developed countries, the involvement in GVCs was expected to open paths for upgrading domestic technological capabilities (Verspagen, 2010) and for shifting towards more complex patterns of innovation (Capello and Lenzi, 2013).…”