Global value chains and economic complexity index: Evidence from generalized panel quantile regression

Abstract

This paper investigates the impact of global value chains (GVCs) participation on economic complexity for a sample of underdeveloped, moderately developed, and developed countries which includes 42 economies from 2000 to 2018. Our empirical analysis finds that the influence of GVC participation on economic complexity varies across quantiles as it has adverse and significant effects on economic complexity in the first five lower quantiles (5th - 25th). It indicates that GVC participation has adverse impacts on economic complexity except for the economy with higher economic complexity. Moreover, forward participation is negatively associated with economic complexity in all the quantiles except for the 90th quantile. In countries with lower and moderate economic complexity, forward participation has a negative impact on how complex the economy is. Alongside, backward participation has positive and significant impacts on economic complexity in the 85th, 90th, and 95th quantiles implying that in a more complex economy, backward participation is positively correlated with economic complexity.