International Linkages, Value Added Trade and Latin American Firms' Productivity
Thursday, 2 July 2015: 4:00 PM-5:30 PM
CLM.B.05 (Clement House)
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.