University of Groningen Global Value Chains and Economic Development Pahl, Stefan

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University of Groningen

Global Value Chains and Economic Development Pahl, Stefan

DOI:

10.33612/diss.121326589

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Publication date: 2020

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Pahl, S. (2020). Global Value Chains and Economic Development. University of Groningen, SOM research school. https://doi.org/10.33612/diss.121326589

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Global Value Chains

and

Economic Development

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Publisher: University of Groningen Groningen, the Netherlands

Printed by: Ipskamp Printing

ISBN: 978-94-034-2607-5 eISBN: 978-94-034-2606-8

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system of any nature, or transmitted in any form or by any means, electronic, mechanical, now known or hereafter invented, including photocopying or recording, without prior written permission by the publisher.

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Global Value Chains and Economic

Development

PhD thesis

to obtain the degree of PhD at the University of Groningen

on the authority of the

Rector Magnificus Prof. C. Wijmenga and in accordance with

the decision by the College of Deans.

This thesis will be defended in public on

Monday 4 May 2020 at 11.00 hours

by

Stefan Pahl

born on 6 April 1988 in Stuttgart, Germany

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Supervisors

Prof. M.P. Timmer Prof. R.C. Inklaar

Assessment Committee

Prof. B. Los

Prof. J. van Biesebroeck Prof. K. Sen

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Acknowledgement

This PhD thesis is the result of several years of research. During such a process, many initial ideas have to be adjusted or even dismissed, and many things just turn out very differently than expected. This high level of uncertainty of research can cause a great deal of frustration. With the right guidance and support, however, this experience turns into something highly enjoyable and into something I would have never wanted to miss! Therefore, I want to thank a number of people who are invaluable to this thesis.

First of all, I want to thank my supervisors Marcel Timmer and Robert Inklaar who greatly contributed to the research of this thesis and beyond. I came to Groningen for the second year of my master’s degree, initially for only one year. During that time, however, you got me excited about research: I enjoyed teaching from both of you on growth, value chains and development and was motivated by the way and type of research you do and your didactics. Marcel, I would like to highlight that, already back then, I was most amazed about how much more motivated I would leave your office than coming in because of the challenging discussions. These bilateral discussions have continuously motivated me over the past years and significantly improved the content of the chapters. It is needless to say that your contribution to the research of the thesis as a whole, and as co-author in particular, is invaluable. Moreover, I am very thankful for all else that goes beyond the direct work on the thesis. For example, Gaaitzen de Vries and you organised my stay at IFPRI before I started the PhD, and you were also instrumental for my work with UNIDO. Both were great opportunities to see more of the research world and to get in touch with other researchers. Robert, I would like to highlight your guidance at the beginning and end of the thesis project, and in particular your feedback on the last chapter and your role in tracking progress. I would lastly like to stress that I admire in both of you that, besides the research skills, you are able to give very critical feedback in a very respectful, constructive way.

I would also like to thank the members of my reading committee Jo van Biesebroeck, Bart Los and Kunal Sen. Thank you for taking the time to read my thesis and for providing stimulating suggestions that will help working towards future publications of the last two chapters. I also want to thank many colleagues from Groningen. Bart, besides your role in the reading committee, I am happy that we also already met early on when you facilitated my first contact

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with this type of research and since then, it is great that your door is (literally) always open. I also want to thank you, Gaaitzen: you introduced me to the work of the GGDC with the 10-Sector Database, you facilitated the stay at IFPRI, and you have remained approachable on many aspects of research and beyond throughout the years. Jop Woltjer and Reitze Gouma, it was fruitful, and a lot of fun, to work together with you on chapter 4 in this thesis. I have further benefitted from many other interactions with colleagues in the GEM and EEF department, among many others Tristan Kohl, Erik Dietzenbacher, and Dirk Bezemer. Further, I want to thank everyone who helped with administration, the GEMmies and SOMmers. Luckily, I only really encountered such issues as I recently engaged in more teaching activities and had to organise the finalisation of the thesis: thanks! I also want to thank David Chilosi, Bert Kramer and David Gallardo for our joint organisation of the PEGDECH seminar, which was a nice way of getting to know different fields of research (mostly economic history though). During my stay in Vienna, I also had great support from Alejandro Lavopa, Adnan Seric and Michael Windisch and I am happy that we could still keep up this relationship over the past years (e.g., with the workshop in Thailand). Lastly, thanks to all people I met at conferences throughout the years, which made exchanging ideas so interesting.

I also gratefully acknowledge financial support from the Nederlandse Organisatie voor Wetenschappelijk Onderzoek (NWO) [grant number 453-14-012] for the thesis as a whole. Furthermore, financial support from the World Bank Group for chapters 3 and 4 is also acknowledged [SST task code p162461].

Pursuing a PhD, however, is also about meeting many other interested and interesting people. You did indeed also contribute by exchanging ideas on the content but in particular by providing a great environment. I always felt that a day in the office without having lunch with you was a bit of a sad day. I am very happy that I joined the PhD, while there were so many other nice people around. The yearly weekend trips and the fact that this year’s trip includes 13 people is a clear sign of this! Daan and Maite, it was just great on many aspects to meet you early on in Groningen because we had many, many great and funny moments! Aobo, it was also really nice getting to know you at the very start of the PhD and in particular that you always give a positive turn to things. Thanks to Johannes for being so motivated for nights out; Nikos and Ferdinand, for your sarcastic comments; and Romina for always being fun! Juliette, thanks for being caring and for canoeing in Giethoorn - a great distraction from Duisenberg. Tobi, Jos and Gianmaria, it is great that you are always motivated to do (new) sports from tennis to beachvolleyball to bouldering to football, and for everything people do afterwards. Xianjia, Joeri and Ibrahim, you

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were all great office mates. Xianjia, I learned many new things from you that I would have otherwise never heard about (e.g., milk powder). Joeri thanks for bringing my Dutch to the next level and Ibrahim for sharing your football insights. Timon thanks for, perhaps involuntarily, making us all a bit more relaxed by telling us about all your small weekend trips. Mart, Daniel, Nick, Duc, Fred, Kailan, Bingquian, Femke and Eda and many others from Duisenberg – all of you contributed to a nice atmosphere and to the many nice experiences we had!

Eduard, thanks for making my arrival to Groningen so easy by introducing me to new meetups right away, such as the film club. Luzia and Marieke, it was great meeting you there and to continue meeting up from Vienna to Berlin. Marianna, Dimitrios and Wen, thanks for always nice conversations. Also thanks to many other people who supported me from outside Groningen. This includes all friends formerly from Göttingen (mostly now in Berlin) – Sascha and Mario great that you showed (as far as I know: genuine) interest in the topic. Ines, thanks a lot for enduring support during the PhD and way beyond! It helped a lot that you understood all the potential issues that come up during the process of writing a PhD thesis (much better than when the roles were reversed). Of course, thanks to my family: my sister Anne and my parents Elisabeth and Peter. Thank you for making studying possible in the first place, motivating me to study whatever I wanted to and, most importantly, encouraging me to always go for new and interesting endeavours and to see places of the world. This is a major reason why I ended up in economics in the Netherlands – ultimately leading to this PhD thesis.

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List of tables

Table 2.1 World VAX-D ratio for exports by manufacturing industries ... 42

Table 2.2 Share of country-years in periods of vertical specialisation ... 46

Table 2.3 Number of countries by trend in VAX-D ratios ... 47

Table 2.4 Decomposition of change in VAX-D ratio for selected countries ... 50

Table 2.5 Vertical specialisation and GDP per capita. Dependent variable: VAX-D ratio... 52

Table 3.1 Difference in means: average annual growth rates in 10-year periods ... 80

Table 3.2 Summary statistics: 10-year periods ... 83

Table 3.3 GVC participation and labour productivity in exports growth ... 86

Table 3.4 GVC participation and employment in exports growth ... 87

Table 4.1 Overview of main sources used for adding seven countries to WIOD ... 128

Table 4.2 Competitiveness in GVCs of final goods ... 131

Table 4.3 GVC specialisation indices by product GVCs ... 133

Table 4.4 Final destination of a country’s GVC value added, 2014 (% shares) ... 137

Table 4.5 Sources of GVC job growth in GVCs of final goods, 2000-2014... 140

Table 4.6 GVC jobs by sector of employment ... 143

Table 4.7 Sources GVC job growth in manufacturing, 2000-2014 ... 147

Table 5.1 Summary statistics ... 208

Table 5.2 Trends in trade facilitation ... 208

Table 5.3 Baseline gravity regression ... 212

Table 5.4 Trade elasticities to trading time by exporting sector groups ... 213

Table 5.5 Net impact of trade facilitation as % of GDP ... 214

Table 5.6 Sectoral structure (%) induced by global improvements to best practices ... 219

Table 5.7 Net impacts of trade facilitation using alterative baseline structures: global changes of observed changes in trading time ... 225

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List of figures

Figure 2.1 VAX-D ratio for exports by all manufacturing industries ... 41 Figure 2.2 World VAX-D ratio for exports by machinery and textiles industries ... 42 Figure 2.3 World VAX-D ratio for exports by manufacturing under alternative scenarios ... 44 Figure 2.4 Examples of countries with non-monotonic trends in VAX-D ratio ... 49 Figure 3.1 Domestic value chains in export production ... 73 Figure 3.2 Marginal effects of GVC participation on labour productivity growth, by levels of

labour productivity in exports ... 88

Figure 3.3 Marginal effects of GVC participation on employment growth, by levels of labour

productivity in exports ... 88

Figure 4.1 Stylised example of GVC incomes ... 118 Figure 4.2 Sources of GVC job growth, low-income countries ... 141