Notes

1. Earlier national input-output–based studies have also found positive productivity effects from offshoring (Amiti and Wei 2009; Egger and Egger 2006; Winkler 2010). 2. East Asia and the Pacific and Europe and Central Asia are emerging market regions but with higher average income per capita than Latin America and the Caribbean and thus providing good aspirational benchmarks. Besides countries eligible for lending that the World Bank includes in the Europe and Central Asia region, our analysis also includes the Czech Republic, Estonia,

Latvia, and Lithuania because they reached high-income status after 2005 and thus were still eligible for World Bank lending in 2000, when some of our analysis starts. 3. In this chapter, the Latin American and Caribbean countries covered are part of the GVC taxonomy discussed later in this section and listed in table 1.1. Most small islands are excluded.

But the exact set of countries in each figure may vary depending on the availability of data for the specific indicator. 4. Regional averages in this analysis (and in what follows) include all countries in annex 1A, figure 1A.1. Simple rather than weighted averages are computed throughout this chapter to avoid a bias toward large trading economies, particularly Mexico. 5. Whereas figure 1.3, panel a, shows a simple correlation, Fernandes, Freund, and Pierola (2016) also provide evidence of a positive relationship between the number of exporters and GDP per capita even after controlling for country size (captured by GDP). 6. This evidence is shown for Chile and Colombia by Gutiérrez de Piñeres and Ferrantino (1997, 1999). 7. For an approximate distribution of backward and forward GVC participation across the four taxonomy groups, by country, see figure 1.10. 8. Fernandes, Kee, and Winkler (2020) show that a higher share of rents from natural resources is positively associated with forward GVC participation (but negatively associated with backward

GVC participation). 9. There is evidence of a positive relationship between forward GVC participation and domestic value added (Stolzenburg, Taglioni, and Winkler 2019). Two reasons might explain a smaller impact of backward participation relative to forward participation: First, the study’s country sample excludes lower-income countries, for which stronger growth gains from backward participation are expected (as shown by Pahl and Timmer 2020). Second, because the study’s country sample is biased toward countries with more sophisticated types of GVC participation, higher forward GVC participation reflects higher value-added services and inputs rather than commodities. So, the gains are higher than they would be in a country sample including many commodity exporters. The gains from forward GVC participation in this study are larger than those from backward GVC participation because of the exclusion of low-income and most lowermiddle-income countries characterized by high forward GVC participation. 10. All countries in our sample in the East Asia and Pacific region except Vietnam have reduced their backward GVC participation since 2000, particularly Indonesia, Malaysia, the Philippines, and

Thailand. 11. Although these measures allow for assessment of a country’s extent of backward and forward

GVC participation, they mask what determines it, including a country’s endowments and sector specialization, geography, market size, foreign direct investment, trade policy, connectivity, the quality of institutions, and other macroeconomic factors (Fernandes, Kee, and Winkler 2020).

This explains, for example, why Brazil, China, and Mongolia have similar positions in figure 1.12, though they differ strongly in these determinants. 12. A caveat in using customs data for measuring GVC participation at the firm level is that such data do not trace firm-to-firm transactions across countries; that would require an unrealistic degree of global cooperation across customs agencies to have linked datasets and linked firm identifiers (World Bank 2020b). Without such linked datasets, it is not feasible to construct firm-level measures of forward GVC participation. Even if a firm is identified as an exporter of intermediate inputs (instead of final goods), it is not possible to establish whether those inputs are fully absorbed in the importing country or whether they are reexported to third markets by the importing firms after having added value to them.