Unraveling the Factors Influencing a Nation’s Competitiveness in Value-Added Trade – A Study of European Union Member States

Absztrakt (kivonat)

The traditional method of measuring trade in gross terms fails to capture the complexities of the global economy, where goods cross multiple borders and intermediate products are counted repeatedly. Recognizing this challenge, domestic value added in exports emerges as a crucial measurement of a country’s ability to maintain a competitive position on the global stage. Given the central role of high-value-added activities in encouraging economic development, prioritizing advancement in global value chains and promoting the creation of value-added products is paramount. The primary objective of this research paper is therefore to systematically examine and compare the factors influencing domestic value added in exports across the member states of the European Union, with a particular focus on the manufacturing sector. Utilizing data for EU-28 countries spanning from 2000 to 2020, panel regression analysis is employed to examine the relationship between domestic value added and key variables such as innovation, export sophistication, technological development, and workforce composition. In addition to sectoral-level analysis, investigation of subsectors within the manufacturing industry is employed, addressing a gap, and standing as a main contribution of this paper to the existing literature. The findings reveal innovation as the primary driver of domestic value creation. Additionally, a significant influence of export sophistication, technological development, and skilled workforce on domestic value added in the manufacturing sector is discovered. At the same time, subsector analysis reveals significant heterogeneity between groups. While innovation emerges as a consistent driver of domestic value added across all subsectors, the impact of other factors varies significantly among different categories. Consequently, this research highlights the need for further investigation into subsector analysis, which can help to account for the unique characteristics of each category and uncover nuanced insights into the specific factors driving value creation.