The Significance of Participation in the Global Production Network to Economic Development: An Econometric Analysis of BRICS+T Countries

Abstract

With globalization, the international fragmentation of production (IFP) splits the production process of final goods and services into several stages undertaken in different countries integrated into global production networks. BRICS + T countries have rapidly participated in the (IFP) process especially after 2000s. The main purpose of this paper is to analyze the nexus between BRICS+T countries’ participation in the global production networks and their economic development. The vertical specialization rate, as an indicator of this participation, had been calculated utilizing OECD Input-Output Tables. Subsequently, the development index was calculated utilizing economic-technological and cultural-institutional indicators published by World Bank. The vertical specialization’s impact on development was estimated utilizing the CS-ARDL estimator. The results revealed that while the vertical specialization has a statistically significant positive impact on development in the short term, a positive but not statistically significant impact was recorded in the long term. Konya (2006) causality test was performed to examine the causal relationship among the selected variables. The results revealed a one-way causality running from development to vertical specialization in China and Turkey and a one-way causality running from vertical specialization to development in Brazil. No causality relationship could be detected in other countries included in the analysis.