Trade specialization and performance in global value chains

Abstract

Abstract This article investigates whether trade specialization explains economies’ trade performance within the context of global value chains (GVCs). We consider trade specialization in natural resources (NR), high- and low-tech manufacturing (LTM and HTM) and business services, before and after the financial crisis. The aimed contribution of this article is to shed light on the effects of trade specialization as measured in domestic value added embodied in exports rather than gross exports. We add to the literature on GVCs by (i) studying the role of the domestic productive structure in countries’ trade specialization and performance, (ii) accounting for the rate of changes in trade specialization as affecting GVC performance. We employ Balassa indexes based on value added flows in a GMM dynamic panel framework. Our results suggest that trade specialization in LTM and NR relate to a decline in the growth of domestic value-added per capita exports relative to other countries. HTM and knowledge-intensive business services exhibit a positive effect during the crisis period. We discuss these findings in relation to the recent debates on the role of manufacturing and premature de-industrialization in developing countries.