Global Value Chains in economic development

Global Value Chains in economic development
Institute for International Political Economy Berlin
Level: beginner
Perspectives: Neoclassical Economics, Marxian Political Economy, Institutionalist Economics, Post-Keynesian Economics, Other
Topic: Development, Emerging economies, globalization, industrial policy
Format: Working paper/Journal article
Link: https://www.econstor.eu/handle/10419/203149

Photo by Adli Wahid on Unsplash

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Global Value Chains in economic development

Hansjörg Herr, Petra Dünhaupt | 2019

 


Abstract: Global Value Chains (GVCs) started to play an increasing and key role in the global economy from the 1990s on. The market mechanism in GVCs supports industrialisation in the Global South and under certain conditions product and process upgrading. But GVCs do not lead to the catching-up of countries in the sense of them approaching real GDP per capita levels comparable with developed countries. These arguments are supported by a critical interpretation of the traditional trade theory, the New Trade Theory and specific approaches to explain GVCs, especially different governance structures and power relationships. Several case studies support these arguments. For catching-up, countries need comprehensive horizontal and vertical industrial policy and policies for social coherence. The small number of countries which managed to catch up did this in different variations.

Key words: Global Value Chains, Under-development, Rent-seeking, Industrial Policy

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