Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/215191 
Year of Publication: 
2019
Series/Report no.: 
IZA Discussion Papers No. 12795
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This paper is the first to estimate the impact of a direct measure of firm-level upstreamness on productivity, wage costs and profits (i.e. productivity-wage gaps). To do so, we merged detailed Belgian linked panel data, covering all years from 2002 to 2010, to a unique data set developed by Dhyne et al. (2015), which contains accurate information on the position of (almost) each commercial firm in the value chain at each year. We rely on the methodological framework that has been pioneered by Hellerstein et al. (1999) to estimate dynamic panel data models at the firm level. Our estimates show that if upstreamness increases by one step (that is, by approximately, one standard deviation), productivity rises on average by 5%. They also indicate that productivity gains associated to upstreamness are shared almost equally between wages and profits. However, upstreamness is found to be more beneficial for workers' wages in less competitive environments, where the price-elasticity of demand for firms' products is typically smaller. Overall, these findings are compatible with the assertion that firms should move up the value chain to be more productive and profitable, but also that being higher in the value chain is likely to facilitate firms' control over strategic downstream activities.
Subjects: 
global value chains
upstreamness
productivity
rent-sharing
linked employer-employee panel data
product market competition
JEL: 
F61
J24
D30
D40
J50
Document Type: 
Working Paper

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