International Linkages, Value Added Trade and Latin American Firms' Productivity

This  paper addresses  the  following  research  questions:  i)  are  firms  characterized by international linkages more productive than other firms? ii) and, eventually, are those belonging  to  industries  more  involved  in  global  production  networks even more  productive?  To this end, we combine the World  Bank  Enterprise  Survey  dataset  with  the  new  OECD-WTO  Trade  in Value  Added  (TiVA)  dataset  and  present  three  main  empirical  exercises: i) an analysis  of  productivity  premia  associated  with participation in international trade and presence of inward FDI; ii) a Cobb-Douglas  output  function expanded to firms  international linkages;  iii)  a  further  expanded  version  of  the above relationship including the TIVA-based indicators of value added trade and industry participation and position in global production networks.

Our empirical outcomes  confirm  the  presence  of  a  positive  causal  relationship  between  participation in international activities and firm performance in the LAC region. Focusing on four big Latin American countries (Argentina, Brazil, Chile and Mexico)  we  show  that  the  actual  level  of  involvement into GVCs matters  as  well. More specifically, we highlight the key role of the GVC position, with a positive impact of upstreamness on firm performance. These empirical results are relevant for policy-making.  They contribute to help institutions to shed light on the importance of the involvement in  global  production  networks  in  increasing  firms  performance  in  LAC countries.