The Effect of the Foreign Value Added on the Domestic Value Added in Exports

Although Global Value Chains (GVCs) have become an important topic for trade and development policy, little is known about their impact on economic performance because the data is limited. In this study, the relationship between foreign value added and domestic value added is analyzed using the World Input-Output Database (WIOD) data. The analysis is conducted using the least squares dummy variable (LSDV) approach for the period of 2000-2014 of 42 countries. The findings show that foreign value added enhances the export performance in the context of forward linkage and domestic value added.