Essays on Global Value Chains: Trade, Participation, and Positioning in the Context of Digitalization and Sustainable Development

Abstract

Digitalization is reshaping global production and trade systems, it enables real-time coordination across borders, allowing firms to optimize global production and participate more efficiently in international trade. This thesis investigates how digital technologies affects global value chains (GVCs) and trade outcomes, using both econometric models and computable general equilibrium (CGE) simulation. Together these methods quantify both direct and economy-wide impacts, yielding a comprehensive assessment of the digitalization–GVC nexus. The three papers in this thesis provide complementary perspectives on the interaction between digitalization, GVCs, and trade performance, with a particular focus on manufacturing and environmental goods, which addresses critical gaps hitherto not addressed in empirical research on this topic.

The first paper employs a structural gravity model to examine how digitalization interacts with geographic distance and RTAs in shaping bilateral manufacturing GVC trade. This holds relevance as policymakers should have insights into the main drivers of GVCs, i.e., digitalization and regional trade agreements (RTAs), and how they interact to impact GVC trade flows. It contributes by way of estimating sectoral digital intensity measures based on the Asian Development Bank (ADB)’s Multi-Regional Input-Output (MRIO) tables, with the analysis covering 62 countries from 2007 to 2019. The results show that digitalization increases GVC exports and mitigates distance-related trade barriers. However, RTAs do not enhance—and may even dampen—the positive impact of digitalization, with significant heterogeneity observed across sectoral and income levels.

Having established the trade-promoting role of digitalization on manufacturing GVC trade, in the second paper of the thesis, the paper employs an economy-wide model to assess not only the economy-wide impacts of digitalization but also its impacts on both backward and forward GVC participation across regions. By introducing digitalization shocks through a sectoral digital input index and multi-regional input-output framework hitherto not attempted earlier in the empirical literature, the simulation quantifies the impact of digital transformation on manufacturing GVC linkages. The findings suggest that while digitalization significantly improves the macroeconomic effects on welfare, output and gross trade. In addition, digitalization enhances backward participation—particularly in simpler forms of GVC involvement—thereby contributing to a structural reorganization of regional production networks.

Furthermore, sustainability in trade and GVCs is an important issue for policymakers to consider. The third paper uses panel data methods to analyze the relationship between GVC positioning and trade in environmental goods across 75 countries. The findings suggest that GVC positioning enhances green trade through a nonlinear channel, and that digitalization acts as a moderator by shifting the structure and strength of this relationship. These are novel empirical findings that hold significant relevance in the current policy debate on green trade and the role of GVCs. Heterogeneity is also evident across different types of environmental goods.

The thesis provides a multi-layered analysis of the technological, and policy factors that shape GVCs and trade outcomes. The thesis contributes to the literature by bridging digitalization and GVC studies, providing novel empirical evidence on how sectoral digital intensity interact with GVC trade, participation, and positioning. It also demonstrates the complexity of interactions between digitalization, GVCs, and sustainable trade outcomes. The results have practical implications for policymakers seeking to modernize RTAs and improve digitalization to promote the development of GVCs and leverage GVCs to support sustainable and inclusive trade development.