Dynamics of Sectoral Participation in Simple and Complex Global Value Chains: Short- and Long-run Determinants

This article examines factors associated with sectoral participation in global value chains (GVCs), distinguishing among overall, simple and complex participation and between short- and long-run relationships. Using a panel of 56 sectors in 43 economies from 2001 to 2014, the study estimates dynamic fixed effects and cross-sectionally augmented autoregressive distributed lag (CS-ARDL) models. The results indicate moderate short-run persistence and relatively rapid adjustment, with approximately 69%–85% of deviations from the estimated long-run relationship corrected within one period in the CS-ARDL specifications. Economic size is positively and consistently associated with all forms of GVC participation in the short run, although its long-run association is less stable. Imported capital is positively associated with complex participation in every full-sample short-run specification, but this pattern is not preserved in the lower-middle income countries subsample. Its long-run association is also sensitive to model specification and sample composition. Domestic capital intensity and the R&D-related variables exhibit limited and context-dependent associations, while R&D-sector capital intensity shows no statistical association in the specifications in which it is included. These findings highlight the importance of considering the type of GVC participation, the time horizon and the income group.

JEL Codes: C33, F14, O50