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Trade and Growth in the Age of Global Value Chains

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  • Carlo Altomonte
  • Laura Bonacorsi
  • Italo Colantobe
Abstract
We revisit the relationship between trade and growth taking into account the recent expansion of global value chains (GVCs). We develop a new instrument for trade based on gravity estimations. Our instrument exploits a recent transportation shock: the sharp increase in the maximum size of container ships, which has more than tripled between 1995 and 2007. This shock has an asymmetric impact on different bilateral trade flows, based on the ex-ante presence of deep-water ports across countries, since these are the only ports that can accommodate the new larger ships. Our empirical set-up allows us to obtain instrumental variables not only for gross trade flows, but also for the different value added components of exports, for which we run separate gravity estimations based on WIOD data. We find that trade has a positive effect on GDP per capita, both in levels and in growth terms. Evidence at the country and industry level suggests that the effect works through both productivity improvements and capital deepening. We show that the effect of exports on income is crucially moderated by differences in their value added composition. In particular, we find evidence of stronger export effects on growth for countries that upgrade their positioning or improve their participation to GVCs more than others over time.

Suggested Citation

  • Carlo Altomonte & Laura Bonacorsi & Italo Colantobe, 2018. "Trade and Growth in the Age of Global Value Chains," BAFFI CAREFIN Working Papers 1897, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    • Handle: RePEc:baf:cbafwp:cbafwp1897
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    Cited by:

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    2. Chen, Maggie Xiaoyang & Lin, Chuanhao, 2020. "Geographic connectivity and cross-border investment: The Belts, Roads and Skies," Journal of Development Economics, Elsevier, vol. 146(C).
    3. Ilaria Fusacchia & Alessandro Antimiani & Luca Salvatici, 2021. "An assessment of import tariff costs for Italian exporting firms," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(1), pages 31-56, April.
    4. Camara Kwasi Obeng & Peter Yeltulme Mwinlaaru & Isaac Kwesi Ofori, 2022. "Global Value Chain Participation and Inclusive Growth in Sub-Saharan Africa," Springer Books, in: Evelyn F. Wamboye & Bichaka Fayissa (ed.), The Palgrave Handbook of Africa’s Economic Sectors, pages 815-840, Springer.
    5. Leonardo Baccini & Arianna Bondi & Matteo Fiorini, 2023. "Global Value Chains and the Design of Trade Agreements," RSCAS Working Papers 2013_56, European University Institute.
    6. Davide Rigo, 2021. "Global value chains and technology transfer: new evidence from developing countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(2), pages 271-294, May.
    7. Saban Nazlioglu & Cagin Karul, 2024. "Testing for Granger causality in heterogeneous panels with cross-sectional dependence," Empirical Economics, Springer, vol. 67(4), pages 1541-1579, October.
    8. Inferrera, Sergio, 2021. "Globalisation in Europe: Consequences for the business environment and future patterns in light of Covid-19," IWH-CompNet Discussion Papers 2/2021, Halle Institute for Economic Research (IWH).
    9. Pol Antràs & Davin Chor, 2021. "Global Value Chains," NBER Working Papers 28549, National Bureau of Economic Research, Inc.
    10. Baccini,Leonardo & Fiorini,Matteo & Hoekman,Bernard M. & Altomonte,Carlo & Colantone,Italo, 2021. "Global Value Chains and Deep Integration," Policy Research Working Paper Series 9598, The World Bank.

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