Global value chains: Effects for integrating economy

Abstract

The paper is devoted to consideration of the effects for the economy integrating into the global value chains (GVCs). The main trends in the development of the global value chains in the modern economy are identified. The concrete indicators that may help to measure the degree of integration of the national economy into the GVCs are singled out and deliberated in details. The authors propose a classification of the GVCs-related effects for an integrating economy. In particular, they outline direct and indirect effects, vertical and horizontal effects, as well as upstream, downstream and feedback inter-industry effects. A conclusion is made that the sign of these effects for an integrating economy basically depends on the form of production fragmentation (international outsourcing, horizontal FDI, vertical FDI or of shoring). The factors that influence the sign and the size of the effects in the integrating economy are pointed out. The authors differentiate the factors that influence intra-industry (horizontal) and inter-industry (vertical) effects. The market structure of the industries, the level of the technological gap between international and national companies, the level of import substitution within the investment project and the level of the export orientation of the project comprise the former group of factors. The level of the intra-industry effect, the level local sourcing, the remoteness of the headquarter country and the level of the technological gap between international company and national companies in the vertically linked industry represent the latter group of factors. In conclusion is stressed that the Russia needs to further deepen its integration into the global value chains in order to technologically develop the national economy.