Surges in participation in global value chains: Drivers and macroeconomic impacts in sub‐Saharan Africa

Abstract

AbstractThis article proposes a cross‐country examination of the drivers and impacts of episodes of surges in countries' participation in international value chains based on event analysis previously used in the empirical literature in studies on export surges or GDP growth accelerations. Using a large sample of developing countries over the period 1990–2018, and relying on the EORA database, the article offers three main results. First, the ‘surges’ are not common, with only 11 episodes recorded in sub‐Saharan Africa over the past three decades. Second, strong FDI inflows and governance quality precede the occurrence of these ‘surges’, while protracted real exchange rate under‐valuations appear to nurture these surges. Third, once they occur, these ‘surges’ are transformative: they are associated with higher real per capita GDP growth, rapid industrialization, stronger diversification, and sophistication of exports, faster poverty reduction and higher urbanisation rate.