Two-Way Participation Of Global Value Chains And Striding Across The "Middle Income Trap"

In the context of globalization,the economic growth of an economy is closely related to the global value chain,but even if the product of the international specialization chain looks the same,the growth space from each participating country embedded in different ways is also different.For the middle-income countries that have been deeply embedded in global value chains,they will cross “the middle-income trap”under the international labor division system.Therefore,in this paper,the crossing of the “middle-income country” was discussed from the global value chain,the global value chain participation and its transmission mechanism was analyzed systematically which has affected the economic development of the “middle-income country”.And those has break through the original framework of domestic structural adjustment.This research was conducted as follow: analyze the participation of the whole global;compare the embedment of value chain in different region;explore the evolution of value chain participation at the industry level;investigate the government intervention in the process.Based on the international comparison,we have analyzed the possible reasons for the emergence of the "middle-income trap" in the international labor division system from different participation ways of chain,and in the accordance with the order — "global value chain-regional value chain-industry value chain-government intervention".Finally,we have identified the differences and possible improvement of the countries in and cross the middle-income.Firstly,based on the development of trade theory,we have explain and analyze the economic growth effects of global value chains and then deduce the dynamic source of the climbing of value chain in its participation,at the same time,analyzed the impact of global value chain on economic growth,including the effects of competition and economies of scale of forward participation and the effects of technology spillover and low-end locking of backward participation,and summarized the crossing path of forward and backward participation affecting the "middle-income trap",and deduce the relevant indicators of forward and backward participation rates with input-output analysis.Above analysis becomes an important theoretical basis for the next empirical analysis,and it can be concluded that the two-way participation of GVCs is related to the "middle-income trap",and the input-output analysis method can be used to verify the relationship between them.Secondly,based on the Ti VA database,the panel random effects model(RE)was used to empirically test the impact of two-way participation of GVCs on the "middleincome trap" crossing at the overall level,and a mediating effects model has been constructed to test the mediating role of total factor productivity.We also examine the economic growth effects of participation in global value chains by economies with different division of labor and degrees of embeddedness.The key findings included as following: forward participation in GVCs can significantly boost the economic growth of countries that have crossed the middle-income trap,but it is not obvious in countries that have fallen into the trap,which can explain why countries that have fallen into the trap;backward participation in GVCs can boost the economic growth of low-income countries at the beginning,but it is not the long-term driver of a country's economic growth.The impact of forward and backward participation in GVCs on the economic growth of a country is realized by the mediating effect of total factor productivity,but we can't find the mediating effect in a country that have fallen into the trap.Thirdly,the Moran's I index was used to analyze the regional spatial correlation,and the Spatial Durbin Model(SDM)with spatial lagged independent variables was selected to further analyze the impact of two-way participation of GVCs on productivity from the regional spatial perspective in order to examine the spatial spillover effect of participating countries in the global value chain on other countries or regions.Besides,we further construct a regional value chain accounting method to analyze the differences in economic growth effects obtained from the link to different regions with the perspective of vertical specialization rates.It was concluded that the spatial spillover effect of developed countries with higher forward participation in GVCs is negative,while the spatial spillover effect of developing countries with higher backward participation is positive.Cooperation with developing countries is more likely to boost total factor productivity of economies than with developed countries.In contrast,the economies caught in the "middle-income trap" are more likely to be associated with developed countries with higher forward participation,as they are more likely to bear the processing and assembling part from the developed countries,thus it is difficult for them to make significant progress in total factor productivity under the negative spatial spillover from developed countries.Fourth,the industry economic growth and industry GVC participation of the sample economies was calculated based on the WIOD database,and a systematic GMM model was used to analyze the differences in the impact of the two-way participation of GVCs of each economy on its industry economic growth based on a dynamic panel model,and the differences has been further analyzed based on the manufacturing at different technology levels and services with different factor intensities.The following conclusions are drawn: the faster growth rate of industry GVC participation,the higher rate of industry economic growth,and,the increase of industry economic growth benefits from the pull of forward participation,but the pulling force is significantly weaker than that of the countries crossing it whose forward participation on economic growth of the countries caught in the trap.The results show that medium-high and hightech manufacturing are the main pulling force of the forward participation of manufacturing of the crossing trap countries,while the countries caught in the trap rely more on medium-low technology manufacturing.In terms of services with different factor intensities,the crossing economies mainly rely on capital-intensive,knowledgeintensive services,while the plunging economies are driven by labor-intensive and capital-intensive services.Fifth,the literature related to the impact of government intervention on economic growth from both sides has been reviewed to,introduce the backward participation bias policy in GVCs representing government intervention into the disequilibrium model.The role of government intervention was analyzed theoretically in two-way participation of GVCs,and verified from an empirical perspective.It was found that the forward participation can promote economic growth,while backward participation has negative impact on economic growth in the process of development,but the existence of government intervention,to some degree,push backward participation continue to drive economic growth,thus makes forward participation have a dampening effect on economic growth.Sixth,a comprehensive analysis was conducted to explore the impact of two-way participation of GVCs on China's economic growth based on value added accounting,applying China's data,and systematically assessing the role of two-way participation of GVCs on China's economic growth from the perspective of regions and industries.The conclusions include as following: the two-way participation of China's manufacturing in GVCs has contributed to economic growth from medium and high technology manufacturing,and the intensity of the effect is relatively between the crossing economy and the plunging economy,but the overall participation structure of the service with different factor intensities is similar to the plunging economy.At the same time,in accordance with the results of the previous analysis,association with regional value chains dominated by developed economies has a suppressive effect on China's total factor productivity.As China makes reasonable adaption to their policies during its participation in global value chains,it is expected to successfully leapfrog the middle-income stage.Finally,based on the findings of the multi-level comparative study on the changes in economic growth brought by forward and backward participation to the crossing plunging economies from the perspective of overall level,regional spatial and industry level,as well as the role of government intervention,we can provide some policy insights for the "middle-income trap" crossing in the context of global value chains.And we can propose some policy recommendations in terms of the improvement of forward participation in GVCs,regional value chain cooperation,industry development differences,the capability of forward participation of manufacturing,development of productive service and improvement of government functions,and sort out the path of crossing the "middle-income trap".A multi-level comparative study has been conducted in crossing the "middleincome trap" under the background of global value chains,and the scope of the study has been expanded from the country overall to regional space and industry growth rate.It can be said that it is an extension of the current research on the economic effects of global value chains and perspective innovation,which complements the lack of global value chain perspective research on the "middle-income trap" and has rich theoretical significance.In addition,it is crucial for Chinese government to formulate targeted GVC participation policies and achieve a leap in development stage.