How important is GVC participation to export upgrading?

Abstract

Exporting higher quality and complex products is deemed pathway to economic growth and development. However, producing such products is knowledge-intensive and requires quality intermediate inputs and advanced technologies. Integration into global trade networks is increasingly argued to be among the pathways to obtain such inputs and technologies, although not all countries may benefit equally from such integration. This paper builds on these arguments and investigates how participation in the global value chain (GVC) affects the quality of exported products. Using a highly disaggregated product-level export data from 122 countries, we find that participation in (backward and forward) GVC impacts positively on the quality of exported products and brings the quality level closer to the quality frontier. While this result persists in the sub-sample comprising developed countries, developing countries only benefit from backward GVC participation. Overall, the results indicate that GVC participation matters to export upgrading but points to a potential heterogeneity on the channel of impact across countries at different levels of development.