The New Member States have been experiencing firm internationalization not only through inward foreign direct investment but also through exporting, importation of foreign technology in investment goods and increased use of imported intermediates. We argue that there are important productivity spillovers within the global value chains, ie. FDI alone does not tell the whole story of the reallocation processes going on in the economies of the NMS. We augment the standard TFP spillover empirical model with modern measures of GVC participation. We show that increased foreign content of exports brings additional productivity gains on top of the ones attributed to exporting. Moreover, we show that in selected cases, participation in the GVC leads to a smaller productivity gap between foreign and domestic firms. In Poland the productivity gains for domestic firms are located in production of intermediate goods with high foreign value content as well as in goods located close to the final demand. In many other NMS the benefits are concentrated close to the final demand.
- This paper uses WIOD data and Amadeus database.
- You can compute the GVC measures used in the paper using the Decompr R package.
- The codes used to compute the Levinsohn-Petrin TFP from firm-level data, the FDI spillover measures from WIOD and Amadeus can be found here and some trade aggregates can be downloaded below. If you use it or any part of it in your research, please, cite our paper.