Patterns of external insertion in global value chains: a comparative analysis between Brazil and China

ABSTRACT The international trade literature has shown the benefits of the international fragmentation of production for developing countries. However, there are considerations about the hierarchy and control in Global Value Chains (GVCs). Thus, this research aims to evaluate the Brazilian and Chinese international insertion in GVCs by proposing an index about technological sophistication in exports (qtech) by technological intensity for 2005-2015. The results pointed out that the integration in GVCs and technological sophistication have been directed towards technological clusters in which Brazil has revealed comparative advantages, while China has been moving towards technological clusters with dynamic comparative advantages.

Do International Fragmentation of Production and Global Value Chains Participation Affect the Long-run Economic Growth?

This article aims to investigate whether the international fragmentation of production and the global value chains (hereafter GVCs) participation affects the economic growth for a set of 40 advanced and emerging economies. It considers four aspects related to the type of participation and position in GVCs captured by different value-added measures: (a) vertical specialisation index; (b) GVC participation index; (c) GVC position index in low-tech sectors; and (d) GVC position index in high-tech sectors. A panel autoregressive distributed lag (PARDL) model is pioneeringly employed to capture the long-term relationship between economic growth and our four measures for annual value-added data from 1995 to 2011, provided by the World Input–Output Tables (WIOT). The main long-run results indicate that (a) higher levels of international fragmentation of production and GVCs’ participation ensure higher GDP per capita growth rates; (b) the fragmentation and GVCs’ participation are more important to GDP growth than the gross exports as a percentage of GDP; (c) GVCs’ participation index, which considers both the ‘forward’ and ‘backward’ participation, is less important than the vertical specialisation, measured by the foreign intermediate imports; and (d the countries engaged in upstream positions in low-technology GVCs were positively and significantly benefitted in terms of growth. JEL Codes: F14, F43

The Characteristics of Regional Value Chains in the Sector of Chemicals and Pharmaceutical Products in the EU

The COVID-19 pandemic has impacted trade flows, causing a trade drop in 2020 that was especially sensitive for pharmaceutical and medical products necessary to ensure public health. The production of pharmaceutical products is dispersed in a framework of global value chains. This study aimed to provide a detailed analysis of the EU situation in the sector of production of chemical and pharmaceutical products, to discover the fragmentation of production chains within the EU as well as globally. International inter-country input–output tables were employed to disaggregate the value-added created in EU member states. The GVC and RVC participation indexes, backward and forward participation, length of sourcing, and selling value chains were calculated and compared with the main global hubs.

Conclusion

This chapter concludes the book, reminding the reader that the act of innovation is what makes humans unique, and urging for a strong belief in human ingenuity. It also briefly summarizes the main points of the book, namely innovation versus invention, innovation and local economic growth, global fragmentation of production, innovation stages, the only two innovation actors, the three goals of innovation policy, and how to adhere to the four fundamentals (flows of local-global knowledge, demand, and inputs; the supply and creation of public and semi-public goods; building a local ecosystem that reinforces the firm-level benefits of the previous two fundamentals; and the co-evolution of the previous three fundamentals).

Inter-firm power relations and working conditions under new production models

In investigating recent changes to the automotive industry production process, such as modularisation, our work emphasises the process of fragmentation of production as a configuring element of inter-firm power relationships, and as an explanatory element in working conditions. From a theoretical framework focused on power relations, we analyse by way of a selected case study how the capabilities of companies and their network positions, together with the agency of labour, shape the power relations that influence the evolution of working conditions. The study does indeed find relevant changes to inter-firm relationships, for example, within networks of assemblers and suppliers, but without a consequent re-balancing of power. This finding serves to explain differences in the evolution of working conditions between distinct companies, these conditions being fully functional to a strategy for profitability and thus difficult to reverse. JEL Codes: J31, L14, L62

Fragmentation of production amplifies systemic risks from extreme events in supply-chain networks

Climatic and other extreme events threaten the globalized economy, which relies on increasingly complex and specialized supply-chain networks. Disasters generate (i) direct economic losses due to reduced production in the locations where they occur, and (ii) to indirect losses from the supply shortages and demand changes that cascade along the supply chains. Firms can use inventories to reduce their risk of shortages. Since firms are interconnected through the supply chain, the level of inventory hold by one firm influences the risk of shortages of the others. Such interdependencies lead to systemic risks in supply chain networks. We introduce a stylized model of complex supply-chain networks in which firms adjust their inventory to maximize profit. We analyze the resulting risks and inventory patterns using evolutionary game theory. We report the following findings. Inventories significantly reduce disruption cascades and indirect losses at the expense of a moderate increase in direct losses. The more fragmented a supply chain is, the less beneficial it is for individual firms to maintain inventories, resulting in higher systemic risks. One way to mitigate such systemic risks is to prescribe inventory sizes to individual firms—a measure that could, for instance, be fostered by insurers. We found that prescribing firm-specific inventory sizes based on their position in the supply chain mitigates systemic risk more effectively than setting the same inventory requirements for all firms.

What Drives Germany's Exports?

This article reviews several hypotheses that aim at explaining the development of German merchandise exports. Based on cointegration estimation techniques, we examine different determinants for their ability to explain German exports during the period 1992–2016. The estimation results indicate that, in addition to the traditional determinants (world demand and price competitiveness), other determinants, such as energy prices and the increasing fragmentation of production processes, are also crucial in explaining German exports.