Global Chain Participation and Productivity in a Dynamic Approach

The evolution of global value chains (GVCs) implied increased world trade flows, primarily in inputs, while simultaneously acting as a conduit for disseminating knowledge, technology, ideas and know-how. Within the framework of endogenous growth and international trade, these flows of intangible goods and services represent a source of gains in productivity and growth. On the other hand, studies show that research and development (R&D) and human capital are essential for a better insertion in this globally fragmented production system. Therefore, there is a possible simultaneous causality between productivity and GVCs, with R&D and human capital playing a central role in this process. The hypothesis is that a dynamic process of cumulative gains characterises the relationship between the variables. The empirical investigations of the present study using vector error correction (VEC) models applied to panel data reveal compelling evidence: productivity and the manufacturing of high-tech domestic inputs exhibit positive responses to shocks across various imported input categories. Moreover, productivity demonstrates its significance in GVC participation by strengthening the production and export of domestic high-tech inputs. JEL Codes : O40, F18