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1. Analysis of Global Value Chain Participation and the Labour Market in Thailand: A Micro-level Analysis

Author:
Upalat Korwatanasakul and Youngmin Baek
Publication Date:
05-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study assesses the links between global value chain (GVC) participation and the labour market to examine the relatively unexplored employment-related distribution effects of GVC integration. Based on the Mincer wage model, we examine the relationship between GVC participation and worker productivity and wages at the individual level. Our main estimation method is a simple ordinary least squares estimation using pooled cross-sectional data from the Thai Labour Force Survey for the period 1995–2011. We also separately examine the effects of forward and backward GVC participation on wages and wage distributions. Our results show that GVC participation induces higher monthly wages for individuals and increases productivity in the labour market through either the forward linkage or backward linkage. We even find that GVC participation can help mitigate inequality. Our findings show that GVC participation promotes inclusive job creation and provides more job opportunities for rural, female, and low-skilled workers. Policies to support leveraging the existing strong industries through upgrading, smoothing labour movements while improving agricultural productivity, and preparing to move towards a services economy can help prepare Thailand, and other developing countries in general, to upgrade to higher value chains. Although GVC participation may be a catalyst for higher wages, greater labour productivity, and more inclusive job creation, its employment effects are complicated. An unbalanced policy framework might contribute to uneven income distributions and exclusive job creation as participating in GVCs through different linkages can benefit different stakeholders in varying ways. Therefore, a policy framework that balances the benefits among stakeholders in terms of wage distributions and job inclusion is ideal.
Topic:
Labor Issues, Work Culture, Global Value Chains, and Labor Market
Political Geography:
Asia and Thailand

2. Does Participation in Global Value Chains Increase Productivity? An Analysis of Trade in Value Added Data

Author:
Shujiro Urata and Youngmin Baek
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper examines the impact of global value chain (GVC) participation on productivity by considering both backward and forward participation. Conducting a panel estimation covering 47 countries and 13 manufacturing sectors for 1995–2011, we found that both backward and forward GVC participation contributes to an increase in the productivity of the countries involved in GVCs. In particular, benefits in the form of improved productivity are larger in cases where developing countries procure intermediate goods from developed countries, or backward participation. Our analysis indicates the importance of GVC participation for improving productivity. We argue that, in order for a country to increase GVC participation, an open, free, and transparent trade and foreign direct investment environment (which is provided by regional trade agreements); well-developed soft infrastructure (e.g. educational and legal systems); hard infrastructure (e.g. transportation and communication systems); and the availability of capable human resources are important.
Topic:
International Trade and Finance, Foreign Direct Investment, and Global Value Chains
Political Geography:
Global Focus