Global Value Chains, Agglomeration Economies, and Inclusive Rural Development: A Systematic Review

ABSTRACT Modifying agrifood systems is very important for sustainable development around the world, though smallholder farmers remain largely excluded from global value chains (GVCs) because of high transaction costs and technological barriers. While traditional development theories emphasize industrialization, recent evidence has suggested a paradigm shift toward “service‐led” rural transformation. This systematic review synthesizes the literature on GVCs, agglomeration economies, and rural development to generate a “co‐agglomeration framework.” We argue that inclusive GVC integration depends on not only trade openness, but also the spatial and institutional clustering of agricultural production with producer services—including logistics, finance, quality certification, and R&D. We identify three core mechanisms through which service co‐agglomeration facilitates inclusion: (1) reducing transaction costs via specialized intermediaries, (2) enabling technological spillovers essential for the bio‐economy, and (3) ensuring compliance with international standards. Furthermore, we critically assess the roles of digitalization as a mechanism for “virtual agglomeration” and the necessity of environmental services for climate resilience. The review concludes that policies must shift from subsidizing farm inputs to fostering “rural service hubs,” thereby creating service ecosystems for high‐quality, inclusive rural development.