The Missing Link: When GVC Does Not Matter for Structural Change

ABSTRACT Despite rising levels of Global Value Chains (GVC) integration in several emerging and developing economies, the latter failed to experience a significant structural change. Thus, this paper examines how participating in global supply chains can have implications on labour reallocation in the economy, and to what extent technological advances can alter this effect. To do that, we use the EORA database and calculate structural change variables. Moreover, we control for the endogeneity between these two variables. Our main findings show that overall, global value chains participation has an insignificant effect on structural change. This result holds for different measures of GVC (backward and forward) and of structural change (static and dynamic). Several mechanisms explain the missing link between GVC and structural change, namely their inability to create enough jobs, the increase in capital‐intensive industries, the dominance of natural resources, and the skill‐biased technological change.