Universitas Gadjah Mada
Faculty of Economics and Business

On Tuesday (28/06), the Laboratory of the Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada (FEB UGM) held a Learning Together at the Department of Economics webinar (BersemIE). BersemIE is an event to facilitate the academic community, especially those from the department of economics FEB UGM, who want to share about their research or studies. In this webinar, BersemIE discussed a paper titled as “Global Value Chains Participation during the Covid-19 Pandemic: A Dynamic Panel Approach” written by Josephine Wuri, M.Si, together with Prof. Tri Widodo, M.Ec.Dev., Ph.D., and Amirullah Setya Hardi, Cand.Oecon., PhD.

This paper that is published in the Economies Journal is relevant research to the current situation because the Covid-19 pandemic has not really ended and the country's economy has been greatly affected by the restrictions that have arisen as a result of the pandemic. Based on Josephine's explanation, Global Value Chains (GVC) is a network of production stages of goods and services from product design to distribution of goods to final consumers produced and assembled in various countries (across international borders). GVC captures the interrelation of trade, specialization, growth among countries, and determines how a country participates in global production networks.

Furthermore, Josephine explained that in recent decades, the emergence of global value chains has changed the pattern of international trade. Today, the production of goods involves international production sharing, which allows countries to trace the value-added distribution to international trade. However, the Covid-19 pandemic has lowered the trade intensity between countries and can disrupt many sectors. This research was conducted using a dynamic panel approach with the generalized method of moment estimator to investigate the impact of the pandemic on GVC participation.

At the end of the explanation, Josephine concluded several important points from her overall research, namely that the fluctuating economic conditions of the Covid-19 pandemic can destabilize global output and lead to the possible negative trade growth. Moreover, shocks in world manufacturing centers of a country can spread to other countries since each country is currently connected to GVCs. The empirical results illustrate that the Covid-19 pandemic led to an average decrease in GVC participation. The research results show that North American countries have the highest average GVC participation from the forward linkage perspective. Meanwhile, countries in the EU have the highest backward linkage values.

In addition, after explaining her research, Josephine also gave several recommendations regarding the topic of GVC participation. First, governments worldwide should expand value-added exports to increase GVC participation, particularly in leading sectors. Second, high-quality institutions must also be realized to implement resilient GVCs. Finally, more research is needed to determine a country's position in the GVC so that each government can improve its comparative advantage. The BersemIE webinar ended with a discussion session and a Q&A session between the participants and the authors of the paper.

Reportage: Kirana Lalita Pristy