Can Value Chain Integration Explain the Diverging Economic Performance within the EU?
Journal of Industrial and Business Economics, 2023, 50, (1), pp.25-47
This paper studies the interplay of integration into EU value chains and industrial development measured by labour productivity.
We focus on the mediating role of domestic institutions compared to technological determinants for the distribution of the
economic value generated along the European and global value chains. Our integration indicator measures value chain trade
within the Single Market relative to global value chain networks. Using a simultaneous equation model, we find an overall
positive effect of integration on labour productivity, which is driven by upstream integration. While the effect of productivity
on integration is positive, it decreases with increasing productivity levels. Highly productive industries rather seek global
value chain trade than regional integration. Better domestic institutions facilitate EU integration, although they favour
industries with less complex product portfolios and lower levels of knowledge cumulativeness. This creates politically unwanted
specialisation effects leading to an unequal distribution of the economic value generated.
JEL-Codes:F13, F14, O25, O43, O52
Keywords:EU integration, Value chains, Productivity, Institutions, Industrial development, Product complexity
Research group:Industrial, Innovation and International Economics