Peer Effects in Productivity and Differential Growth: A Global Value-Chain Perspective

Using multinational input-output data, we analyze how the productivity of countries adjusted for participation in global value chains affects their output growth in manufacturing sectors. Based on parametric and non-parametric methods, we find that value-chain linkages are critical to the productivity-growth nexus and help to explain cross-country differences in sectoral output growth rates compared to the situation where these linkages are ignored. Our results have implications for macroeconomics, where they point to peer effects in productivity as drivers of growth, and for economic development, where they illustrate how the participation in global value chains may outweigh disadvantages in productive performance at the level of individual countries. They may also encourage future empirical tests of replicator dynamics to verify whether global value chains can explain the weak evidence of selection forces at the firm level.