Opening and linking up: Firms, global value chains and productivity in Latin America

Pierluigi Montalbano, Silvia Nenci & Carlo Pietrobelli

#2017-030

This work explores the relationship between exports, Global Value Chains' (GVCs) participation and position, and firms' productivity. To this aim, we combine the most recent World Bank Enterprise Survey in Latin American and Caribbean (LAC) countries with the OECD-WTO trade in value added data. To explore the above relationship we adopt an extended version of the standard Cobb-Douglas output function including indicators of export performance and GVCs. We control for heterogeneity among firms (by country, region, and industry), sample selection, firms' characteristics and reverse causality. Our empirical outcomes confirm the presence of a positive relationship between participation in international activities and firm performance. They also show that both participation in GVCs and position within GVCs matter. These findings have strong policy implications and may help policymakers in choosing the best policy options to enhance the link between GVCs integration and firms' productivity.

Keywords: Firm productivity, Exports, Trade in Value added, Global Value Chains, learning by supplying

JEL Classification: F14, F61, D24, L22, O54