Date: 2019
Type: Article
Domestic value chains as stepping stones to global value chain integration
World economy, 2019, Vol. 42, No. 5, pp. 1467-1494
BEVERELLI, Cosimo, KOOPMAN, Robert B., STOLZENBURG, Victor, NEUMUELLER, Simon, Domestic value chains as stepping stones to global value chain integration, World economy, 2019, Vol. 42, No. 5, pp. 1467-1494
- https://hdl.handle.net/1814/60669
Retrieved from Cadmus, EUI Research Repository
We study the role of Domestic Value Chains (DVCs) for Global Value Chain (GVC) integration. In the presence of industry specific fixed costs of fragmenting production and of switching across input suppliers, DVCs can either be stepping stones or stumbling blocks for GVCs. Focusing on backward linkages, that is the sourcing of intermediates, we provide robust empirical evidence in favour of the stepping stone hypothesis. In our benchmark specifcation a one standard deviation increase in DVC integration raises subsequent GVC integration by about 0.4%. To identify the mechanisms at work, we exploit two dimensions of industry level heterogeneity: product differentiation (a proxy of fragmentation costs) and relationship specificity (a proxy of the costs of switching between suppliers). We find that DVC integration is less conducive to GVC integration in industries that are characterized by relatively high switching costs and relatively low fragmentation costs.
Additional information:
First published: 15 January 2019
Cadmus permanent link: https://hdl.handle.net/1814/60669
Full-text via DOI: 10.1111/twec.12779
ISSN: 0378-5920; 1467-9701
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