Evolvement of Global Value Chain Positions in the Central - Eastern European Countries - a New Dimension in Catching Up?

Abstract

The paper examines the evolvements in the global value chain positions of the Central and Eastern European (CEE) countries. This approach enables us to reveal both economic and sector-level structural changes in the economic catching-up process. To study the structural patterns, we developed a modified smile curve framework that combines the value-added ratio and upstreamness index. Data were derived from the WIOD database from 2000 to 2014. By undergoing a significant catch-up in the last decades, CEE countries have shown considerably different patterns in their evolvements of GVC positions. Regarding the economy level, we concluded that leading economies can be described by a “U”-shaped smile curve over the period. There are two further dominant patterns that have become widespread among the CEE countries. Until 2014, the most common structure is marked by a “/” shape, which reflects an upstream-weak economy (e.g., BGR 2000; HUN 2000; LVA 2014). The second most common structure is marked by an inverted “U” shape (“^” shape), which denotes a manufacturing-heavy economy (e.g., EST 2000; POL 2000; HUN 2014; POL 2014). There is no significant difference in the added value ratio of the manufacturing sectors compared to the western countries. Implications for Central European audience: Typically, the CEE countries are shifting towards supplier positions and sectors with less complex output, resulting in the flattening and twisting of the “U” shape. While most studies focus on a single sector or region, this study involves many sectors and many countries that provide a real global context, thus extending the GVC-related empirical studies concerning the CEER. To further facilitate the significant catching-up process, the upstream-weak economies should develop their structure in a way that less simple and specialised production processes are done at a high rate in any sector. Heavy manufacturing should elaborate market connections and develop connections to customers. It alerts that a transition is required from extensive to intensive and knowledge-based developments.