Global value chains and challenges for economic policy
Abstract
The article analyses the influence of productivity shocks on wages and trade in components for the German economy. Accordingly, historical aspects of the country’s participation in the production fragmentation processes are examined. Furthermore, we determine factors maintaining the efficiency of national companies’ insertion into global value chains. Then, we estimate a structural vector autoregression model with long-run restrictions. As a result, we plot impulse response functions for wages and trade in components. It was found that a one-unit increase in productivity leads to the change in the equilibrium positioning of a country in global value chains. More specifically, it shifts the production specialization pattern and brings the wages up to the new steady state level. Besides, we show that changes in productivity are causally prior to changes in wages and trade in components. Hence, it is recommended to develop mechanisms of intellectual property rights protection which are among major factors driving the process of advanced technologies attraction from foreign companies.
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References
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