DOMESTIC SHARE OF VALUE-ADDED AND THE DEVELOPMENT OF PRODUCTION CAPABILITIES OF LOCAL FIRMS WITHIN GLOBAL VALUE CHAINS

It is controversial whether the increase in the share of value-added created by developing economies has resulted from the upgrade of their production capabilities. This paper, using the trade data of Vietnam, estimates the weighted sectoral income elasticities of demand for exports over the period 1997-2017 and collates the weighted sectoral domestic share of value-added over the period 2005-2015. This paper finds the following. Firstly, the rise of exports demand in high value-added sectors happened. Secondly, the aggregate domestic share of value-added continued to decrease in Vietnam. Finally, the weighted domestic share of value-added the high-tech and the mid-tech sector grew at a slower speed than the weighted foreign value-added. The findings suggest that engaging in global value chains has not led to the upgrade of production capabilities of local Vietnamese firms.