Wage effects of global value chains participation and position: An industry-level analysis
Gideon Ndubuisi & Solomon Owusu
#2021-042
We examine how participation and positioning in global value chains
(GVC) affect wages. We also examine whether this relationship is
conditioned by a country's development level and labour market
regulation. The results show that participation and upstream
specialisation in GVCs are associated with higher wages but only in
developed countries. In developing countries, while GVC participation is
associated with higher wages, upstream specialisation exerts downward
pressure on wages. For analysis focusing on the role of labour market
regulation, we find that GVC participation only exerts a positive effect
on wages under stringent labour market regulation. Under flexible labour
market conditions, it exerts downward pressure on wages but allows for
the effective reallocation of GVC workers into knowledge-intensive and
high value added upstream activities in the value chain that are more
productive and wage rewarding. Additional analysis on the effects of
GVCs along the wage distribution show that participation and upstream
specialisation in GVCs are associated with higher wages across all wage
segments in the developed countries. In developing countries, GVC
participation only benefits higher wage earners and make low-wage
earners worse-off. Even when upstream specialisation is associated with
lower wages across all wage segments, low wage earners are
disproportionately affected.
Keywords: Wages; Global Value Chains; GVC Participation; Upstream
Specialisation
JEL Classification: F14; F16; J16; P51