Figure 3 - uploaded by Timo Seppälä
Content may be subject to copyright.
Source publication
In this study, we analyse Estonia's position in global value chains using World Input-Output Data and firm-level data. We find that 69% of Estonia's total exports are intermediate goods and services, exceeding the EU average (65%). Two-thirds of Estonian imports are intermediates. Our findings suggest that Estonia is heavily involved in vertically...
Similar publications
Despite the strong public interest in the accountability and efficiency in education spending on higher education institutions (HEIs) in Lithuania, there are currently no existing studies which have examined the impact of HEIs on the country’s economy. In the present study, we have used a disaggregated input-output table for Lithuania’s tertiary ed...
Citations
... As the Baltic states became more integrated into the global economy after joining the EU, they triggered the emergence of studies into their role and place in global value chains (GVCs) [11][12][13][14]. Some major studies analyze interme diate goods, among other things. ...
... Experts believe that the drop in prices of oil and other mineral fuels and raw materials was responsible for the crisis (see, for ex ample: [27][28][29][30][31]). However, there were other reasons, such as: slower economic growth; sluggish increase in global investment; a slowdown in Chinese economic development; increased protectionism; shrinking volume of global trade in in termediates within GVCs; decreasing demand for imported goods in developing countries; and so on 12 . ...
Russia and the Baltic States have a long-standing relationship of industrial specialisation, cooperation, division of labour and trade exchange, all dating back to the Soviet Union. Today, this relationship is facing a tough test amid political and ideological challenges and risks. The last two years have seen a profound and large-scale crisis caused by the global COVID-19 pandemic. Overall, the production linkages between Russia and the Baltic States have adapted in response to the existing problems, remaining resistant to the geopolitical and pandemic shocks. This article examines the production linkages between Russia and the Baltic countries, investigating the export-import flows of consumer and intermediate goods in 2003—2020. A comparative study of the Baltic States’ production linkages with Russia and their main partners in the EU — Germany and Finland — is carried out. It is concluded that, before the introduction of sanctions in 2014 and the world trade crisis of 2015—2016, Russia was a more promising market than Germany and Finland for the Baltic States’ companies trading in intermediate goods.
... In addition to the problems related to deployment, another set of problems arises from the complexity of dynamic multi-industrial environments. The problem with static workflow designs is that in today's economy, supply chain structures are often complex and prone to reconfigurations (Rajala et al., 2018;Ali-Yrkkö et al., 2017). While at the industry level, the data integrations and the required reconfigurations may be manageable, at the inter-industrial level the complexity in this regard increases exponentially. ...
Accepted for publication - Collecting and utilizing product life-cycle data is both difficult and expensive for products that move between different industrial settings at various points of the product life-cycle. Product-centric approaches that present effective solutions in tightly integrated environments have been problematic to deploy across multiple industries and over longer timespans. Addressing deployment costs, incentives, and governance, this paper explores a blockchain-based approach for the deployment of product-centric information systems. Through explorative design science and systematic combining, the deployment of a permissionless blockchain system for collecting product life-cycle data is conceptualized, demonstrated, and evaluated by experts. The purpose of the blockchain-based solution is to manage product data interactions, to maintain an accurate single state of product information, and to provide an economic incentive structure for the provision and the deployment of the solution. The evaluation by knowledgeable researchers and practitioners identifies the aspects limiting blockchain-based deployment of solutions in the current industrial landscape. Combining theory and practice, the paper lays the foundation for a blockchain-based approach to product information management, placing design priority on inter-industrial and self-sustained deployment.
... Therefore, we apply the GVC participation measure proposed by Koopman et al. (2010) which captures all sources of value added in gross exports and eliminates the "double counting" problem. 3 The GVC participation index is defined as: ...
The COVID-19 pandemic has led to an unprecedented collapse in global economic activity and trade. The crisis has also highlighted the role played by global value chains (GVC), with countries facing shortages of components vital to everything from health systems to everyday household goods. Despite the vulnerabilities associated with increased interconnectedness, GVCs have also contributed to increasing productivity and long-term growth. We explore empirically the impact of GVC participation on productivity in Estonia using firm-level data from 2000 to 2016. We find that higher GVC participation at the industry level significantly boosts productivity at both the industry and the firm level. Frontier firms, large firms, and exporting firms also benefit more from GVC participation than non-frontier firms, small firms, and non-exporting firms. We also find that GVC participation of downstream industries has a negative correlation with productivity. Frontier firms and large firms benefit more from GVC participation of upstream industries, while non-frontier firms and small firms benefit more from GVC participation of downstream industries. Our results suggest that policies designed to promote participation in GVCs are important to raise aggregate productivity and potential growth in Estonia.
... Moreover, according to many authors (i.e. Gaulier, Lemoine and Ünal-Kesenci, 2007;Fontagné, Freudenberg and Gaulier, 2007;Miroudot, Lanz and Ragoussis, 2009;Cingolani, Felice and Tajoli, 2015;Falzoni and Tajoli, 2015;Ali-Yrkkö, Mattila and Seppälä, 2017), international fragmentation of production chains induced an increase in the share of intermediate goods in total trade relative to the final goods. As a result, individual links between exports and imports become more visible, revealing a possibly bidirectional relationship between exports and imports (Barrell and Dées, 2005). ...
Current account imbalances and their sustainability in the EU member countries has been examined in the recent empirical literature since the establishment of the Euro Area. Deeper trade integration within the EU is generally beneficial. However, international fragmentation of production resulting from emergence of global value chains deepens external imbalances due to persisting differences in macroeconomic performance among member countries. The main objective of the paper is to examine effects of price and non-price determinants of exports and imports in 21 EU member countries. We have estimated the determinants of export and import demand functions in the 21 EU member countries. Our results indicate the high role of imports in aggregate export functions, while aggregate functions indicated a high contribution of domestic demand to the imports dynamics. Dis-aggregated analysis revealed the importance of intermediates in the external trade within and outside the EU from territorial and commodity aspects.
The ever-progressing digitalization of the economy and society is unlocking new op- portunities for organizations engaging in services. We are in the middle of a trans- formation of the service sector that can be likened to the advent of mass production in the 1940s. Based on recent advances and developments in artificial intelligence, digital platforms, and blockchain systems, we are witnessing the emergence of new digitalization phenomena of metahuman systems, artificial intelligence platforms, and meta-organizations. Jointly, these forces are shaping now, or will be in the near future, the service activities of organizations around the world. They enable mass hyper-personalized services and mass servitization – new types of high variety and high-volume service processes. Artificial intelligence applications like search and recommendation engines, and artificial intelligence platforms such as Google Maps, Chat GPT, BloombergGPT and Stable Diffusion can be perceived as early manifes- tations of the ongoing transformation. Already in the present day, applications and platforms such as these can be adopted in a wide range of downstream tasks, thus enabling personalized service experiences for audiences of one. While increasing the value of service offerings, mass hyper-personalization and mass servitization also have the potential to increase the productivity of service operations and the entire service sector, especially in the context of knowledge-intensive work. This introduc- tory chapter gives us an opportunity to not only provide an overview of the articles included in this collection and their contributions, but also allows us to reflect and provide an up-to-date synthesis of key emerging concepts and research directions grounded in our research. Thus, this chapter in its own right goes above and beyond the articles included in this collection and contributes to the ongoing discussion on digitalization and the future of the service sector.
This paper aims to shed light on work-life balance in Latvia during the state of emergency. The COVID-19 outbreak has led many governments to introduce lockdowns. While imposed restrictions may help to contain the spread of the virus, they may also result in substantial damage to population well-being. The COVID-19 outbreak in Latvia demonstrates the extent and ways in which socio-demographics factors have determined different patterns of behaviour, attitudes, employment changes and harmonised work and life balance. The study describes the chronological development of COVID-19 in the country. It describes labour migration to and from Latvia before the COVID-19 outbreak. It provides geographical features of the distribution of confirmed COVID-19 cases. The extent of the COVID-19 threat at different levels is assessed focusing on the global, national, regional and intra-family level. Finally, work forms and work-life balance are analysed according to geography and age groups.
Although Russia and the Baltics have historically been economic partners, the economic relations between them are tense today. Nearly stagnating bilateral trade contributes little to the development of either side. The Baltics-Russian bilateral trade conducted within global value chains (GVC) and operations of multinational companies is much more resistant to geopolitical and economic shocks than traditional international trade. In particular, the accession of Estonia, Latvia, and Lithuania to the EU and NATO in 2004 and the introduction of reciprocal EU-Russia sanctions in 2014 did not curb GVC activities between Russia and the Baltics. The article discusses factors in the transformation of the Baltics-Russian GVCs amid COVID-19. The research aims to prove regionalisation as a viable prospect for the transformation of global value chains in Russia and the Baltics. In the medium term, regionalisation is possible as (1) part of global trends towards GVC transformation in the industries in which Russia and the Baltics traditionally specialise; (2) as a response to the long-term structural challenges faced by Russia and the Baltics in creating a new generation of internationally competitive firms; (3) as a result of companies tackling the effects of the pandemic against the background of historically stable relationships; (4) as a product of strong social contacts and soft power. GVC regionalisation will be driven by individual companies, regional (local) governments, and Russian-Baltic cross-border cooperation initiatives. Finally, repercussions for Russian and Baltic politics are discussed alongside GVC regionalisation benefits for all the parties involved.
International fragmentation of production draws increasing attention in both theoretical literature in the area of foreign trade. Due to international fragmentation of production in world economy we may observe changes in understanding of international competitiveness. Traditional measures of export performance provide biased information for policy decisions. As a result, many authors focus on estimations of domestic value added shares in unit of exports that is used as a measure of vertical specialization in foreign trade.
We may observe high dynamics of fragmentation of value chains on global level than on regional level. Territorial proximity or common trade areas are still considered as key determinants of distribution of value added within production chains though with reduced importance that 15-20 years ago. Intention of countries to participate in new international division of labor based on participation of country in the global value chains reveals lot of opened questions for industrial policy framework.
Examination of relative importance of individual sectors of the economy in the international production chains naturally corresponds to a requirement to use appropriate methodology. In order to examine structural and intra-industrial linkages, empirical literature tend to implement input-output analysis that is based on the use of multiregional input-output tables that provide crucial information not only on
value added within individual segments of production chains but also on quantitative and qualitative features of inputs (labor and capital).
Empirical literature on input-output analysis concentrates on examination of equilibrium in the individual country. Such studies are based on the use of input-output tables due to their precise ability to monitor not only value added in export industries but also on the individual levels of a production chain. Most of the production for exports in developed countries consist of industrial products while the key portion of value added may be concentrated in non-industrial sectors providing materials and services for upper segments of a production process. Such information reveals a relative importance
of intra-industrial linkages.
Input-output analysis enables us to examine intra-industrial linkages while it improves the quality of analysis due to its focus on relative importance of international trade in the whole production process. For evaluation of such linkages the empirical literature suggests to use a coefficient of industrial interdependence or coefficient of leakages from foreign trade. Employment of above mention methods on long-term time series enables us to identify and analyze important structural changes in economy or to do some estimations about future changes. Some papers confirm that a variety of countries
experienced a reduced importance of production industries while the role of service industries clearly increased during last two decades. Authors also highlight reduced mutual intra-industrial linkages in the analyzed countries while the relative importance of imports for domestic production increased.
Considering narrow trade linkages among Eurozone member countries and their high external trade openness, the analysis of mutual flows of production among countries represent another interesting area for a research. Mutual linkages among national productions can be also examined according to their contribution to external imbalances. Some authors analyze flows of goods and intermediate goods within the global supply chains, volumes of cross-country flows of production employed in domestic production that is subsequently exported abroad.
Analysis of interdependence of countries due to fragmentation of production is also crucial for examination of effects on business cycle of countries and its synchronization. Fragmentation of production obviously triggers and further strengthen positive effects on correlation of cyclical development among countries.
This book was written in connection with scientific project VEGA no. 1/0961/16 “Economic Implications and Perspectives of the Participation of the Slovak Republic in the Process of Production”. It contributes to the recent empirical literature that deals with origins, effects and implications of the international fragmentation of production and participation of countries in the global value chains in the following areas:
1. International fragmentation of production is recognized as one of the key implications of the internationalization of the production. We start with analysis of the key features, theoretical concepts and empirical knowledge of incentives, conditions, utterances as well as key and side effects resulting from the participation of the countries in the process of international division of labor. It enables us to explain the key factors, conditions and implications that cause the deviation of small economies from the participation on traditional international division of labor towards the participation that is based on new international division of labor and consider the participation of the country on international production chains.
2. Explanation of theoretical and empirical literature, patterns, relationships and implications considering the forms and intensity of participation on global value chains. Particular attention is given to evaluation of before mentioned features in the Slovak Republic regarding its participation in global value chains with the member and non-member EU counties. Our results outline the influence of regionalism and trade policy on the participation of the Slovak Republic in global value chains.
3. Explanation of the important methodological aspects of input-output (I-O) analysis enables us to determine the contribution of this approach by identifying of the key implications resulting from participation of the Slovak Republic in global value chains.
4. I-O analysis using multi-regional I-O tables to capture the value added formation in the country (with a dominant focus on the Slovak Republic) enables us to identify the flows of intermediate products and final goods by industries. Interactions with EU countries (without trade barriers) and with third countries (with trade barriers) resulting from the common trade policy (on imports) or trade policies of third countries (for exports) will be considered as well.
5. Clarification of long-term trends in formation of branch structure of the Slovak economy based on identification of cross-branch linkages (linkages forwards/backwards. Benefits will be based on the identification of key implications of the structural changes in the Slovak economy in the context of long-term participation of the SR in the process of international division of labor resulting from the Slovak Republic involvement in the international production chains.
6. Participation of the Slovak Republic in the fragmentation of production activities within the global value chains is identified and the key implications critically discussed. Particular attention was payed on effects of internal and external competitiveness (at both the industry and country levels), employment (at both the industry and country levels), factor productivity, the key characteristics of the production chains (including the creation of value added at different levels of the production chain), essential characteristics of the inter-branch relations, and dynamic development of the individual
sectors.
7. In-depth analysis of the inter-branch relations and key aspects of value added within Slovak industries (particular attention was focused on the participating of industries in the international fragmentation of production activities) enable to identify the potential to increase the Slovak benefits from involvement in the process of international production fragmentation. We have focused on domestic production chains and domestic segments of international production chains especially in three following areas: 1. The growth potential of the Slovak economy (production chains a) with high growth potential, b) with a significant impact on employment, c) with high value added creation, d) with high competitiveness in the domestic and foreign markets). 2. Export-oriented (production chains: a) with significant size/growth of export performance, b) with the potential to new markets entry). 3. Regional development (production chains: a) with a significant impact on regional development (especially undeveloped), b) with the potential development of cross-border cooperation).
8. Critical discussion of the policy recommendations aiming to support the three areas identified in the previous paragraph regarding the business environment, regional development, labor and education based on alternative scenarios and perspectives of Slovak participation in the production activities fragmentation within the GVCs.
Long-term structural changes in the world economy, as a natural consequence of globalization and internationalization of economic events represent one of the key factors of international fragmentation of production activities. Considering the shortcomings of the traditional approaches to the evaluation of countries` participation on the process of the international labor division, the book is focused on the analysis of the substantial features of the value added creation process. Analysis is based on the sector levels in the Slovak Republic and selected EU member countries considering international fragmentation of production activities via employing input-output tables.
The key results confirms that the Slovak Republic is intensively participating in the global value chain. Based on the key findings we suggest the economic and political recommendations that intensify structural changes that increase positive macroeconomic and microeconomic effects derived from the active participation of the Slovak Republic in the global value chains.
Thus, the goal of this book - Global Value Chains, International Fragmentation of Production and Implications for European Union - is to encourage the exchange of new ideas about challenges that arises from emergence and existence of global value chains, international fragmentation of production and, as a result, new insights into the international division of the labor. The book consists of seven chapters. Contributing authors discuss crucial aspects of the recent problems that are related to: emergence and development of the global value chains (chapter 1), position of the Slovak Republic in
the process of international division of labor, value added creation and global value chains (chapter 2), balance of trade evaluation in the Slovak Republic according to the traditional measures and value added approach (chapter 3), structural changes of the Slovak economy (chapter 4), offshoring and labor demand changes in the Slovak Republic (chapter 5), input-output analysis of agriculture and food sectors in the selected European countries (chapter 6) and International fragmentation of production and export-import determination in the EU member countries (chapter 7).
The editor would like to thank all authors that have contributed to the volume with their enthusiasm and high scientific professionalism.
The Chinese digital platform giants – Baidu, Alibaba and Tencent – have quickly risen to be amongst the most notable developers and users of artificial intelligence. One important catalyst for this development has been the so-called Platform Business Group (PBG) strategy used by Chinese digital platform firms. In this strategy a platform firm aims to develop powerful synergies by tightly linking together a number of different platforms it owns so as to offer multiple services to users under its umbrella. By applying the PBG strategy, Baidu, Alibaba, and Tencent are able to exploit enormous multi-faceted datasets on individuals for use in the development of artificial intelligence algorithms. As a result, the Chinese platform giants appear to be taking a somewhat different approach with the development and use of artificial intelligence than their Western counterparts. If the Chinese platform giants succeed in their efforts to expand into the global market, their business strategies will introduce a different threat to the conventional European industries from those challenges already presented by Apple, Amazon, Facebook, Google, and Microsoft.
