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Productivity spillovers in the GVC

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Presentation at ECOMOD conference 2016

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Productivity spillovers in the GVC

  1. 1. Motivation Method Results Conclusions Productivity Spillovers in the GVC The Case of Poland and the New EU Member States Jan Hagemejer Narodowy Bank Polski University of Warsaw July 8, 2016 Hagemejer Productivity & GVC
  2. 2. Motivation Method Results Conclusions Outline 1 Motivation Introduction Literature 2 Method Outline Foreign ownership premium Spillovers from GVC GVC measures 3 Results 4 Conclusions Hagemejer Productivity & GVC
  3. 3. Motivation Method Results Conclusions Introduction Literature Why? Ongoing internationalization of New Member States economies due to: transition EU integration involvement in the GVC Internationalization is believed to have important direct and indirect eects on rm productivity through selection eects (export related) through FDI hosting through FDI productivity spillovers FDI exports are already well established in the literature - but to what extent participation in GVC and the position in the production chain matters for productivity? Hagemejer Productivity GVC
  4. 4. Motivation Method Results Conclusions Introduction Literature Why GVC? Emerging economies compete for a good placement in the GVCs. This motivates rms to restructure and reorganize. Inclusion in GVC may involve: adoption of high quality standards adoption of modern technology adoption of modern management techniques The smile curve debate? Ye, Meng, and Wei (2015), Kowalski et al. (2015) or Cheng et al. (2015). Is the distribution of gains uniform along the GVC? Is it good to be close to the nal demand? Hagemejer Productivity GVC
  5. 5. Motivation Method Results Conclusions Introduction Literature Literature FDI spillover literature is already abundant. Most studies follow the Sma»y«ska-Javorcik (2004) method based on rm-level data and input output tables. Other notable works Haddad and Harrison (1993), Aitken and Harrison (1999), Djankov and Hoekman (2000) or Konings (2001). Own sector eects, backward and forward eects. Review can be found in Crespo, Fontoura, and Proenca (2009) Irsova and Havranek (2013) analyse more than a 1000 of FDI spillovers in a large-scale meta-analysis showing that, NMS: the overall evidence of FDI spillovers is heterogeneous. Hagemejer and Kolasa (2011) show large spillovers from sectoral internationalization (FDI, exporting, imports of intermediates). Spillovers are either horizontal of backward. Hagemejer Productivity GVC
  6. 6. Motivation Method Results Conclusions Outline Foreign ownership premium Spillovers from GVC GVC measures What we do? Incorporate the GVC measures in the productivity premia/spillover framework Use Amadeus database for the economies of the New Member States Compute TFP using Levinsohn and Petrin (2003) method using materials as a proxy for unobservables Combine multiple waves of Amadeus to maximize the span of the sample: 1997-2011 for most countries Merge rm-level Amadeus database with the sector-level GVC and spillover measures computed using the WIOD database. Hagemejer Productivity GVC
  7. 7. Motivation Method Results Conclusions Outline Foreign ownership premium Spillovers from GVC GVC measures Premia from foreign ownership Is GVC participation associated with a lower productivity GAP between foreign and domestic rms? The following equation is estimated: TFPit = β1foreignit +β2foreignit ·GVCit +β3GVCit +εit (1) Hagemejer Productivity GVC
  8. 8. Motivation Method Results Conclusions Outline Foreign ownership premium Spillovers from GVC GVC measures Spillovers from GVC Is GVC participation associated with a lower productivity GAP between foreign and domestic rms? The following equation is estimated for domestic rms: ∆TFPijt = α0 +α1∆HZjt +α2∆BWjt +α3∆FWjt +α4∆GVCjt +α5∆EXPjt +εit (2) ∆TFPijt is a change of TFP in rm i in sector j and time t. HZjt, BWjt,FWjt are the measures of horizontal, backward and forward linkages as dened originally by Smazynska-Javorcik (2004). ∆EXPjt is a change in export share of output at sectoral level to account for productivity eects related to exporting (learning-by-exporting or self selection). Firm-level xed eects, time dummies, sector-clustered SE Hagemejer Productivity GVC
  9. 9. Motivation Method Results Conclusions Outline Foreign ownership premium Spillovers from GVC GVC measures GVC measures We measure upstreamness according to the denition provided by Antras et al. (2012). Ui = 1 · Xi Yi +2 · ∑N ij zij Xj Yi +3 · ∑N k=1∑N ij zij zjk Yi +... (3) We measure foreign content of exports using Wang, Wei, and Zhu (2013) backward-based decomposition that is valid on the sectoral level FVA (foreign value added of exports) - from intermediate and nal goods VS (vertical specialization) - overall foreign content of exports Hagemejer Productivity GVC
  10. 10. GVC measures
  11. 11. Poland: foreign ownership premium
  12. 12. NMS: foreign ownership premium
  13. 13. NMS: foreign ownership premium
  14. 14. Spillovers: Poland
  15. 15. Spillovers: NMS
  16. 16. Spillovers: NMS
  17. 17. Conclusions Results are heavily heterogenous Poland: most of the GVC related productivity gains are in intermediate goods this is where foreign content of exports is associated with lower productivity dierences between domestic and foreign enterprises. At the same time productive rms are, other things equal, located close to the nal demand. it pays of to be on close to the nal consumer unless being further away involves a high content of imported foreign value added in exported goods. In most of the other countries (except Hungary where results are similar to that of Poland) where positive spillovers in the GVC exist, they tend to stem from production of nal goods. Results are similar when labour productivity is used instead of TFP.

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