Global Value Chain Participation and Productivity

This study analyzes the impact of firm-level participation in global value chains (GVCs) on productivity and production performance in Chinese manufacturing. Using a merged panel from the Annual Survey of Industrial Firms (ASIF) and Chinese Customs Trade Statistics (CCTS) for 1998–2007, we construct a binary indicator for GVC participation (two-way trading status) and continuous measures that capture backward and forward integration. To address selection and dynamic treatment concerns, we use firm fixedeffects estimations combined with a propensity-score-matching difference-in-differences (PSM-DID) framework with staggered treatment timing. We report three main findings. First, GVC participation is strongly associated with firm expansion; two-way traders have significantly higher output, employment, and domestic value added. Second, productivity effects vary. Forward participation, which measures domestic value added in foreign exports, is positively and consistently associated with total factor productivity (TFP), while backward participation, which indicates reliance on imported intermediates, is negatively associated with TFP and domestic value added. Third, productivity gains occur mainly at higher participation intensities, suggesting that deeper and more upstream integration is required for measurable efficiency improvements. Overall, the evidence indicates that the productivity effects of GVC integration depend on both the direction and depth of participation.