Industrial Structural Change and the Shifts in Comparative Advantage in Globalized Production

Xianjia Ye, University of Groningen

Structural change in developing countries is usually understood as a shift of employment from agriculture to industry, and from less skill-intensive industries to more sophisticated and high-skill intensive ones. With increasing internationalization of production processes, this typology no longer holds true. Nowadays, most manufacturing products are produced in global value chains (GVCs), with different stages of production taking place in different countries in the world. This has major consequences for our understanding of development patterns and raises the need to analyse the structural change as the shift in actual tasks carried out in an economy. Industrial upgrading is not merely the shift from one industry to another, such as from textile to electronics, but more importantly, the shifts from less to more advanced tasks, such as from assembly to R&D within the same electronics industry.
However, our knowledge on the later type of structural change is yet very limited. This paper aims to contribute by using new data on tasks carried out in GVCs for a large set of countries. I follow Hidalgo et al (2007) and analyse the potential paths of structural upgrading in a task space framework, built from bilateral relatedness between tasks in various industries based on the probability that a country has revealed comparative advantages (RCAs) in both tasks. Importantly, to control for offshoring I use value-added export instead of gross export to construct the RCAs; this is crucial as in GVC production gross export contains a sizable amount of foreign value-added. The task space reveals that a task is in general more related with other tasks at the same skill level, while the relatedness is low between low- and higher-skilled tasks, even within an industry. For less developed countries it seems easy to participate in the low-skilled tasks of sophisticated GVCs, and this is expect to bring a large gain. However vertical upgrading within industries to higher-skilled tasks is hard to achieve; participation in GVCs is easy while the skill upgrading along the GVC is difficult.

About the speaker
Xianjia Ye is currently a PhD candidate in the Faculty of Economics & Business in University of Groningen. He has obtained his bachelor and master degrees in economics, also from Groningen. His research interests are international trade and labour economics, with a focus on the implications of offshoring and global value chains on technical change, structural change and the labour demand.

Venue: Conference room (room 0.16 & 0.17)

Date: 22 September 2016

Time: 12:00 - 13:00  CET