The significance of GVC is i Hyper specialization ii Productivity gains iii Better jobs Select the c...........

Economic and Social Issues Liberalization, Privatization and Globalisation

World bank released World Development Report titled “Trading for Development in the Age of Global Value Chains”. A value chain refers to the “full range of activities that firms and workers do to bring a product from its conception to its end use and beyond”. It involves activities like production of a good or service and its supply, distribution, and post-sales activities etc. When the value chain is distributed across different firms in different countries, it means that these activities are divided among different countries. This phenomenon where value chain is spread across the globe- it is called GVC. For example, a bike assembled in Finland with parts from Italy, Japan, and Malaysia and exported to the Arab Republic of Egypt is a GVC. For example, a bike assembled in Finland with parts from Italy, Japan, and Malaysia and exported to the Arab Republic of Egypt is a GVC.GVCs are vehicles for technology transfer: Unlike in traditional trade in which firms in different countries compete, GVCs are networks of firms with common goals. GVCs involve longer-term firm-to-firm relationships. This nature of GVCs makes them a particularly powerful vehicle for technology transfer and sharing know-how along the value chain.

The significance of GVC is

i Hyper-specialization

ii Productivity gains

iii Better jobs

Select the correct answer using the code given below

i. and ii only

ii and iii only

i. and iii only

all of the above

none of these

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Explanation:

Hyper-specialisation: GVCs promote hyper-specialisation, which improves efficiency. By breaking up complex production process, GVCs allow countries to specialize in specific parts or tasks of production.

Productivity gains: In traditional trade, where products cross borders only as finished products. In GVC trade, intermediate inputs cross border, and domestic firms get access to greater variety of higher-quality or less costly intermediate inputs increasing productivity. Studies suggest a 10 percent increase in the level of GVC participation is estimated to increase average productivity by close to 1.6 percent.

Better jobs:

Through firm-to-firm relationships, GVC play an important role in on-the-job learning, and employer- sponsored training within GVCs can be an effective mechanism for skill development.

GVCs promote capital-intensive production as it allows large scale production and precision of parts. This generates quality jobs, and also there’s overall increase in jobs because of the large boost to exports. GVCs bring to countries pull workers out of less productive tasks and into more productive jobs.