Global Value Chain II

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    Firm Volatility in an Era of Global Value Chain: The Role of Product Quality
    (AERC, 2025) Gideon Ndubuisi; Solomon Owusu
    It is widely recognized that trade and volatility are intricately linked, which has led to a large literature that examines the nature of such relationship. Despite more than 50% of global trade now taking place through the global value chain (GVC), this literature has proceeded without considering the role of GVC. This paper fills this gap by examining the effect of GVC participation on firm job growth volatility and the role of product quality in shaping this relationship. We combine custom transaction-level data and data on firm characteristics that are both provided by the South African Revenue Services and National Treasury (SARS-NT) on the universe of formal manufacturing firms in South Africa for the period 2010-2017. We find robust evidence suggesting that embeddedness in GVC reduces firm volatility, especially for firms that produce and export higher-quality products in the value chain. Therefore, our results provide evidence that GVC offers firms the opportunity to build resilience in terms of reducing volatility, which is paramount to building production capacity, stable export earnings, and higher value capture in the value chain.
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    Trade in Business Services’ Booms: The Case of Ghana
    (AERC, 2025) Andrea Ariu
    This paper analyzes the growth of trade in business services with a particular focus on Ghana. This country has experienced the fastest and most important increase in business services in recent years. This spectacular growth has led Ghana to export as much as a developed country and improved its economy. The main factor underneath this growth is the improved capacity to export business services, which is likely to be accounted for by an impressive inflow of foreign companies attracted by the economic and political conditions, together with the establishment of the Secretariat of the African Continental Free Trade Area in the country. These results are not specific to Ghana. In other African and non-African countries, supply-side determinants are the main propellant of growth in the export of business services.
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    Greening Trade through Global Value Chains in Africa
    (AERC, 2025) Angella Faith Montfaucon; Socrates Kraido Majune
    The global response to climate change necessitates that less developed economies adapt and maximize new potential export opportunities in global trade, and access green technology through imports for their own green transformation. Using detailed firm-level data for Malawi and Kenya (2013-2020), this paper tests whether firms in global value chains (GVCs) participate more in green trade relative to non GVC firms. Second, we test whether importing green goods leads to exporting green goods. Green goods are heterogeneous and are divided into 19 different categories, depending on their usage in climate mitigation and adaptation. We find that imports of green goods far exceed exports, signaling that trade currently serves more as an access to green technologies with limited exports of these products. Second, being a GVC firm is associated with a higher probability of importing than exporting green goods. Also, the increase in trade value after a firm becomes a GVC is much larger for imports than exports. Third, higher imports of green goods are associated with higher exports of green goods, especially for GVC firms. Therefore, GVCs can play a key role in Africa’s green transition and trade competitiveness. As such, it is imperative for African governments to attract foreign direct investment in the green sector, potentially targeting sectors where they can gradually acquire comparative advantage and start exporting green goods in the future.
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    GVCPs in Zimbabwe's Critical Sectors in the Face of Environmental Pollution and Climate Change: The Case of Agriculture and Mining Sectors
    (AERC, 2024-11-27) Dube, Benhilda; Nyika, Teresa; Pasara, Michael Takudzwa
    This study analyses global value chain participation (GVCP) in Zimbabwe's two critical sectors of agriculture and mining in the face of environmental pollution and climate change. Mining and agriculture are Zimbabwe's largest export sectors by value, and the later plays a critical role towards food security. However, the two sectors have potential conflicting interests on land as well as environmental pollution. The study employs the Auto Regressive Distributive Lag (ARDL) and ARDL-EC (error correction), to analyse short-run and long-run relationships. The results indicate that, in the short run, lagged GVCP agriculture exerts positive pressure on GVCPagriculture by 0.66% while, climate change (droughts) and pollution (CO2 emissions) exert negative pressure on GVCP agriculture at 5% and 1% level of significance, respectively. However, GVCP mining and population growth did not significantly reduce GVCP agriculture. Moreover, GVCP mining and population growth increase transport CO2 emissions both in the short run and long run at 5% and 1% level, respectively. Thus, mining is not environmentally neutral. In the long run, interaction between population growth and mining rents reduce transport CO2 levels at 5% level. The study recommends government to raise mineral taxes for those participating in mining and use the revenues to subsidise the agriculture sector. In the agriculture sector, government can remove import tax on agriculture equipment such irrigation equipment as well as the removal of other restrictions including opening up grain price to market forces to increase quality and level of participation. The government should continue enacting and enforcing policies which minimize pollution, such as limits on carbon emissions.
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    Assessing the Drivers of Firm Participation in Global Value Chains: Empirical Evidence from Tanzania
    (AERC, 2024-11-27) Kweka, Josaphat; Sooi, Fadhili
    Using firm-level data from the recently available Tanzania Enterprise Survey (TES) 2022, this paper provides empirical analysis of drivers of firm participation in global value chains (GVCs), and implication of such participation on firm performance in Tanzania. The findings show that, firm size, awareness of external markets, investment in Research and Development (RandD), and engagement in innovation and technology upgrading are significant drivers of firm participation in GVCs for Tanzania. The paper confirms the widely acclaimed conclusions in the literature that firm participation in GVCs is positively and significantly associated with higher firm performance. However, despite the positive role of GVC, the extent of firm participation appears low for Tanzania, mainly on account of low level of capacity of often small and informal firms. The findings underscore the need to increase government's efforts to improve environment and incentive for small firms to formalize and grow. The results are also supportive of the need for policy to promote regional integration, investment in RandD, innovation, and technology upgrading.