Integration of the economy to the global value chains

Global value chains (GVCs) are key characteristic of the development of the modern economy at the present period. The integration of the national economy to the GVCs may be used as an effective instrument for its modernization and effectiveness increase. In this paper the effects in the economy integrating into the GVCs are analyzed. The author’s approach to the classification of these effects is based on structuring the different forms of companies’ integration into the global value chains. In the paper the effects of shifting production stages to the economy as well as the effects of shifting production stages off the economy are distinguished. The first type of the effects is associated with foreign direct investment, the second type – with offshoring and international outsourcing. In both cases direct and indirect effects as well as inter-industry and intra-industry effects could be identified. Based on the existing empirical research we generalize the effects of foreign direct investment and international outsourcing and offshoring. We outline the instruments of the government policy that will increase benefits and decrease losses of integrating of the national economy into the global value chains. To increase effectiveness and competitiveness of the national economy in the context of its integrating into the GVCs the active national policy should be conducted in the following fields: stimulating foreign direct investment (FDI) inflows, growth of foreign trade, increase in the quality of the human capital, promoting competition in the local market, raising national firms’ productivity, effective spatial location of the firms in the economy, and regulating of the migration flows.

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