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Stefan Pahl

German Institute for Global and Area Studies (GIGA)

Stefan Pahl is postdoctoral researcher at the German Institute for Global and Area Studies (GIGA). His research focusses on the role of global value chains for economic development through job creation, productivity growth and structural change. Stefan has previously worked with UNIDO and IFPRI on topics of industrial development and structural transformation. He has been lecturer at the Groningen Growth and Development Centre (GGDC) at the University of Groningen where he also obtained his PhD.
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Fostering Inclusive and Sustainable Global Value Chains: The Role of the G20
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Research Session: New Insights from Supply Chain Research
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Cling together, swing together: the contagious effects of COVID‐19 on developing countries through global value chains

This paper aims at estimating the economic vulnerability of developing countries to disruptions in global value chains (GVCs) due to the COVID‐19 pandemic. It uses trade in value added data for a sample of 12 developing countries in sub‐Saharan Africa, Asia and Latin America to assess their dependence on demand and supply from the three main hubs China, Europe, and North America. Using first estimates on COVID‐19‐induced changes in final demand and production, we obtain an early projection of the GDP effect during the lockdowns that runs through trade in GVCs. Our estimates reveal that adverse demand‐side effects reduce GDP up to 5.4 percent, and that collapsing foreign supply puts an even larger share of countries’ GDP at risk. Overall, we confirm conjecture that the countries most affected are those highly integrated in GVCs (South‐East Asian countries). We argue, however, that these countries also benefit from a well‐diversified portfolio of foreign suppliers and demand destinations, possibly leading to a cushioning of economic downswing because COVID‐19 stroke major hubs at different times.

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Structural Change in Exports: from product to functional specialization

Trade analysis on the basis of countries’ export baskets can be misleading when production is globally fragmented. The chapter argues for a switch to analysis of the type of activities that are embodied in exports. The chapter discusses two steps towards this goal. It first discusses the transition in trade studies from product to vertical specialization. A country’s vertical specialization in trade is measured as the share of domestic value added in its gross exports. The chapter identifies three waves of vertical specialization in the world economy since 1970 and documents the servicification of manufacturing exports. Results from cross-country analysis show a robust association between specialization and productivity growth, but not between specialization and employment growth. Next, the chapter considers functional specialization in trade based on the measurement of distinct activities in export such as fabrication, marketing and R&D, based on an occupational classification of workers. It documents how advanced economies continued to specialize in headquarter activities, while quickly moving out of fabrication activities. It also shows that there are many idiosyncratic determinants of a country’s specialization pattern beyond its general development level. The chapter ends with suggestions for further research, given that the measures of trade in value added and activities presented are still in a development phase.

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Do Global Value Chains Enhance Economic Upgrading? A Long View

Exporting through global value chains (GVCs) has recently been highlighted as a panacea for weak industrialisation trends in the South. We study the long-run effects of GVC participation for a large set of countries between 1970 and 2008. We find strong evidence for the positive effects on productivity growth in the formal manufacturing sector. This effect is stronger when the gap with the global productivity frontier is larger. However, we find no evidence for a positive effect on employment generation. These findings also hold in analyses of sub-sets of countries and industries and are robust to the inclusion of non-manufacturing employment.

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Patterns of vertical specialisation in trade: long-run evidence for 91 countries

The authors estimate the domestic value-added content in exports of manufacturing goods (VAX-D ratio) for 91 countries over the period from 1970 to 2013. They find a strong decline in the world VAX-D ratio since the mid-1980s mostly accounted for by the substitution of foreign for domestic intermediates. Using a breakpoint detection method, they identify three waves of vertical specialisation in the world economy: 1970–1979, 1986–1995 and 1996–2008. The authors find that most countries (79) initiated a period of vertical specialisation at least once. They find strong evidence that the VAX-D ratio correlates negatively with GDP per capita, and that the negative slope is flattening out at higher levels of income.

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Jobs in Global Value Chains: New Evidence for Four African Countries in International Perspective

What is the potential for job growth in Africa under participation in global value chains (GVCs)? In this study the concept of GVC jobs is introduced which tracks the number of jobs associated with GVC production of goods. A novel decomposition approach is used to account for GVC jobs by three proximate sources: global demand for final goods, a country's GVC competitiveness (measured as the country's share in serving global demand) and technology (workers needed per unit of output). Based on newly assembled data, it is shown how GVC jobs and incomes have changed over the period 2000–14 in Ethiopia, Kenya, Senegal and South Africa, compared to developments in some other low- and middle-income countries in the world. The four African countries stand out in terms of a low share of GVC jobs in the (formal) manufacturing sector, and a relatively high share in agriculture due to strong backward linkages, especially in the case of food production. All countries benefitted highly from growing global demand for final goods. At the same time it appears that technical change in GVCs is biased against the use of labour, greatly diminishing the potential for job growth through GVC participation.

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