Assessment of the heterogeneous impacts of global value chain participation on Sustainable economic growth and environmental quality

Abstract

The Global Value Chain (GVC) is an essential aspect of sustainable economic growth and environmental quality in countries that participate in it. Therefore, comprehending the relationship between GVC and economic growth and carbon emissions is critical to achieving global climate neutrality targets. However, there is a paucity of knowledge regarding the impacts of disaggregated levels of GVC on economic growth and carbon emissions in countries with different income levels. In this study, we utilized the SYS-GMM model to explore the relationships between backward and forward GVCs and the economic growth and carbon emissions of 42 lower-middle, 36 middle-upper, and 48 high-income countries using data from 1995 to 2018. Our key findings suggest that forward GVC significantly increases economic growth and reduces CO ₂ emissions. Conversely, backward GVC reduces the economic growth and CO ₂ emissions of high-income countries. We also found that upper-middle-income economies can enhance their economic growth and reduce CO ₂ emissions by increasing their backward GVC. In contrast, lower-middle-income economies can increase their economic growth by participating in both forward and backward GVCs. However, higher levels of participation in both GVC components result in increased CO ₂ emissions. Our findings emphasize the importance of considering income levels when analysing the impact of GVC participation on economic growth and environmental sustainability. Overall, the relationship between economic growth and CO ₂ emissions with backward and forward GVCs varies significantly across country categories.