Global Value Chains Participation and Social Upgrading: Evidence from Developing Countries

This paper explores the effect of Global Value Chain (GVC) participation on social upgrading, which is captured by skill upgrading and working condition measures. Based on comprehensive firm-level data from the World Bank Enterprise Survey (WBES), this study provides a dataset of 84,191 firms in 117 developing countries. Using a propensity score matching a difference-in-differences approach and controlling for fixed effects, the results suggest an overall positive significant effect of GVC integration on social upgrading, i.e., skill upgrading and working conditions. However, according to the sectoral evidence, this effect is very heterogeneous amongst sectors, with a strong negative impact in the textile and garment sector, where GVC participation is strongly associated with skill downgrading and poor working conditions. The paper provides evidence that the positive effect of Global Value Chains (GVCs) depends on specific industries and is mainly driven by capital intensive sectors. Furthermore, the results are consistently gender neutral, except for highly skilled firms and for the garment and textile sector, which appear to exert a negative effect on the share of female skilled labour. Finally, the effect of GVCs is more evident for initially highly skilled firms.