Daria Taglioni

Launch Event: How Supply Chain Research Can Help Solving Societal Challenges

Economic upgrading through global value chain participation: which policies increase the value-added gains?

The emergence of global value chains has opened up new ways to achieve development and industrialization. However, new evidence shows that not all countries have gained from participating in global value chains, and that country-specific characteristics matter for economic upgrading in global value chains. Using a panel data set of developing and industrialized countries at the sectoral level, this chapter first finds that global value chain participation as a buyer and especially as a seller increases domestic value added. Second, the chapter examines whether policy can amplify economic upgrading through global value chain integration. It finds that all assessed policy areas – targeting investment and trade flows, the business climate and institutions, as well as the quality and conditions of inputs and output – consistently magnify the effects of global value chains on domestic value added – in particular, through integration as a seller.

World Development Report 2020: Trading for Development in the Age of Global Value Chains

Making Global Value Chains Work for Development

Economic, technological, and political shifts as well as changing business strategies have driven firms to unbundle production processes and disperse them across countries. Thanks to these changes, developing countries can now increase their participation in global value chains (GVCs) and thus become more competitive in agriculture, manufacturing and services. This is a paradigm shift from the 20th century when countries had to build the entire supply chain domestically to become competitive internationally. For policymakers, the focus is on boosting domestic value added and improving access to resources and technology while advancing development goals. However, participating in global value chains does not automatically improve living standards and social conditions in a country. This requires not only improving the quality and quantity of production factors and redressing market failures, but also engineering equitable distributions of opportunities and outcomes - including employment, wages, work conditions, economic rights, gender equality, economic security, and protecting the environment. The internationalization of production processes helps with very few of these development challenges. Following this perspective, Making Global Value Chains Work for Development offers a strategic framework, analytical tools, and policy options to address this challenge. The book conceptualizes GVCs and makes it easier for policymakers and practitioners to discuss them and their implications for development. It shows why GVCs require fresh thinking; it serves as a repository of analytical tools; and it proposes a strategic framework to guide policymakers in identifying the key objectives of GVC participation and in selecting suitable economic strategies to achieve them.