Emphasis on domestic value added in export in the era of global value chain: evidence from Thailand

Abstract

Policy makers in several countries are seeking to increase domestic value added in export. The purpose of this paper is to examine this emphasis in trade and industrial policy in the era of global value chains. The formal empirical analysis adopts Thailand as a case study, and employs a mixture of input–output analysis and panel econometrics to model the relationship between domestic value added and two export performances indicators (net-export earnings and export-led income). The findings from a system GMM estimator suggest that industries with greater domestic value added do not perform better than those with lower domestic value added. There is no significant relationship between domestic value added and net-export earnings and export-induced income. However, there is evidence that greater participation in global production networks significantly increases export performances. The upshot is that emphasis placed on domestic value added may run counter developmental gains from participation in global value chains.