Global value chain embeddedness, labour productivity and employment in the Asia-Pacific countries

Abstract

Purpose The purpose of this paper is to examine the effects of the global value chain (GVC) participation and the associated improvements in labour productivity and employment among 16 Asia-Pacific countries. Design/methodology/approach First, the indicators of GVC participation are computed using annual multi-region input-output tables over the period 1990-2014. Second, the study examines the long-run association between GVCs and labour productivity through Pedroni (2004) and Westerlund (2007) panel cointegration techniques. Then in the third step, the long-run elasticities are estimated using dynamic ordinary least squares (DOLS) and fixed-random effects models. Finally, the direction of causality is examined using the Dumitrescu and Hurlin (2012) panel causality technique. Findings The result shows an increasing participation of GVCs among Asia-Pacific countries. The findings also show the long-run relationship between GVCs and labour productivity. The long-run elasticities suggest the positive association of GVCs with labour productivity and employment. Further, the categorization of Asia-Pacific countries based on income groups reveals that improvement in labour productivity and employment outcomes is significantly greater in the case of middle-income countries. Finally, the results from panel causality infer that the direction of causality runs from GVCs to labour productivity and GVCs to employment. Practical implications The findings enable policymakers to formulate appropriate policies in Asia-Pacific countries to keep the momentum of increasing their participation in GVC for boosting labour productivity and employment gains. Originality/value To the author’s knowledge, this is the first empirical study examining the spillover effects of GVC on labour productivity and employment in case of Asia-Pacific countries.