The effects of international logistics in global value chain trade
Abstract
The current empirical literature shows that logistics plays a vital role in increasing the total volume of international trade. However, there is scarce literature on the impact of logistics performance on global value chain trade. Therefore, the objective of this paper is to investigate the effect of logistics performance on global value chain trade, measured by the value-added exports. The empirical specification of this paper is based on the structural gravity model of international trade. The analysis is based on biennial panel data on bilateral trade flows for the EU-15, CEE, and the Western Balkans and covers the period from 2010 to 2018. The model is estimated with a Poisson Pseudo Maximum Likelihood Estimator. The results show that logistics performance appears to have significant positive effects on global value chain trade and that the logistics performance of the partner country plays a more critical role than the logistics performance of the reporting country. Institutional quality matters greatly for global value chain trade. Individual differences in the observed variables were found between selected groups of countries. The need to improve logistics performance and invest in knowledge and technology will help countries improve in value chains, along with adequate institutional support.
Keyword : logistics performance, global value chains, value-added trade, gravity model, PPML, international logistics
How to Cite
Zaninović, P. A., & Bugarčić, F. Ž. (2023). The effects of international logistics in global value chain trade. Journal of Business Economics and Management, 24(5), 841–856. https://doi.org/10.3846/jbem.2023.20443
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Antràs, P., & Gortari, A. (2020). On the geography of global value chains. Econometrica, 88(4), 1553–1598. https://doi.org/10.3982/ECTA15362
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Çelebi, D. (2017). The role of logistics performance in promoting trade. Maritime Economics & Logistics, 21(3), 307–323. https://doi.org/10.1057/s41278-017-0094-4
D’Aleo, V., & Sergi, B. S. (2017). Does logistics influence economic growth? The European experience. Management Decision, 55(8), 1613–1628. https://doi.org/10.1108/md-10-2016-0670
Damijan, J., Kostevc, R., & Rojec, M. (2018). global supply chains at work in Central and Eastern European countries: Impact of foreign direct investment on export restructuring and productivity growth. Economic and Business Review, 20(2). https://doi.org/10.15458/85451.66
Gani, A. (2017). The logistics performance effect in international trade. The Asian Journal of Shipping and Logistics, 33(4), 279–288. https://doi.org/10.1016/j.ajsl.2017.12.012
Hafner, K. A., Kleinert, J., & Spies, J. (2022). Endogenous transport costs and international trade. The World Economy, 46(3), 560–597. https://doi.org/10.1111/twec.13337
Hausman, W. H., Lee, H. L., & Subramanian, U. (2013). The impact of logistics performance on trade. Production and Operations Management, 22(2), 236–252. https://doi.org/10.1111/j.1937-5956.2011.01312.x
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Host, A., Pavlić Skender, H., & Zaninović, P. A. (2019). Trade logistics – the gravity model approach. Zbornik Radova Ekonomskog Fakulteta U Rijeci: Časopis Za Ekonomsku Teoriju I Praksu/Proceedings of Rijeka Faculty of Economics: Journal of Economics and Business, 37(1), 327–342. https://doi.org/10.18045/zbefri.2019.1.327
Hummels, D. (2001). Time as a trade barrier (GTAP Working Papers). Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, United States. https://doi.org/10.21642/GTAP.WP18
Hummels, D. L., & Schaur, G. (2013). Time as a trade barrier. American Economic Review, 103(7), 2935–2959. https://doi.org/10.1257/aer.103.7.2935
Lasinio, C. J., Manzocchi, S., & Meliciani, V. (2016, January 1). Intangible assets and participation in global value chains: An analysis on a sample of European Countries. https://econpapers.repec.org/RePEc:lui:lleewp:16129
Koopman, R., Powers, W., Wang, Z., & Wei, S. J. (2010). Give credit where credit is due: Tracing value added in global production chains. https://doi.org/10.3386/w16426
Koopman, R., Wang, Z., & Wei, S. J. (2014). Tracing value-added and double counting in gross exports. American Economic Review, 104(2), 459–494. https://doi.org/10.1257/aer.104.2.459
Korinek, J. & Sourdin, P. (2011). To what extent are high-quality logistics services trade facilitating? (OECD Trade Policy Papers, No. 108). OECD Publishing, Paris. https://doi.org/10.1787/5kggdthrj1zn-en
Kowalski, P., Lopez Gonzalez, J., Ragoussis, A., & Ugarte, C. (2015). Participation of developing countries in global value chains (OECD Trade Policy Papers No. 179). OECD Publishing, Paris.
Luttermann, S., Kotzab, H., & Halaszovich, T. (2020). The impact of logistics performance on exports, imports and foreign direct investment. World Review of Intermodal Transportation Research, 9(1), 27. https://doi.org/10.1504/WRITR.2020.106444
Manova, K., & Yu, Z. (2016). How firms export: Processing vs. ordinary trade with financial frictions. Journal of International Economics, 100, 120–137. https://doi.org/10.1016/j.jinteco.2016.02.005
Gomes Nogueira, C., Padilla-Pérez, R., & Villarreal, F. G. (2017). Value chain selection and industrial policy. https://doi.org/10.18356/55424b04-en
Marti, L., Puertas, R., & Garcia, L. (2014). Relevance of trade facilitation in emerging countries’ exports. The Journal of International Trade & Economic Development, 23(2), 202–222. https://doi.org/10.1080/09638199.2012.698639
Noguera, G. (2015, January 1). Trade costs and gravity for gross and value added trade. https://www.semanticscholar.org/paper/Trade-Costs-and-Gravity-for-Gross-and-Value-Added-Noguera/72214dcb638cb4299b85840333ce707594a7f88f
OECD. (2013). Knowledge-based capital and upgrading in global value chains. In Supporting investment in knowledge capital, growth and innovation (pp. 215–252). https://doi.org/10.1787/9789264193307-9-en
Park, S. (2020). Quality of transport infrastructure and logistics as source of comparative advantage. Transport Policy, 99, 54–62. https://doi.org/10.1016/j.tranpol.2020.07.016
Pomfret, R., & Sourdin, P. (2018). Value chains in Europe and Asia: Which countries participate? International Economics, 153, 34–41. https://doi.org/10.1016/j.inteco.2016.11.002
Rezaei, J., van Roekel, W. S., & Tavasszy, L. (2018). Measuring the relative importance of the logistics performance index indicators using Best Worst Method. Transport Policy, 68, 158–169. https://doi.org/10.1016/j.tranpol.2018.05.007
Ruta, M. (2017, September 13). Preferential trade agreements and global value chains: Theory, evidence, and open questions. SSRN. https://doi.org/10.1596/1813-9450-8190
Saslavsky, D., & Shepherd, B. (2014). Facilitating international production networks: The role of trade logistics. The Journal of International Trade & Economic Development, 23(7), 979–999. https://doi.org/10.1080/09638199.2013.811534
Stehrer, R., & Stöllinger, R. (2014, February 15). The Central European manufacturin core: What is driving regional production sharing? (FIW-Research Reports No. 2014/15-02). http://hdl.handle.net/10419/121234
Vrh, N. (2018). What drives the differences in domestic value added in exports between old and new E.U. member states? Economic Research-Ekonomska Istraživanja, 31(1), 645–663. https://doi.org/10.1080/1331677X.2018.1438910
Wang, Z., Wei, S. J., Yu, X., & Zhu, K. (2017). Measures of participation in global value chains and global business cycles (NBER Working paper 23222). https://doi.org/10.3386/w23222
Kejžar, K. Z., Velić, A., & Damijan, J. P. (2022). COVID‐19, trade collapse and GVC linkages: European experience. The World Economy, 45(11), 3475–3506. https://doi.org/10.1111/twec.13314
Silva, J. S., & Tenreyro, S. (2006). The log of gravity. The Review of Economics and statistics, 88(4), 641–658. https://doi.org/10.1162/rest.88.4.641
Zaninović, P. A., Zaninović, V., & Skender, H. P. (2021). The effects of logistics performance on international trade: EU15 vs CEMS. Economic Research-Ekonomska Istraživanja, 34(1), 1566–1582. https://doi.org/10.1080/1331677X.2020.1844582
Zaninović, P. A. (2022). Do ICT and technological development facilitate supply chain trade?. Zbornik Radova Ekonomskog Fakulteta U Rijeci: Časopis Za Ekonomsku Teoriju I Praksu/Proceedings of Rijeka Faculty of Economics: Journal of Economics and Business, 40(2), 313–327. https://doi.org/10.18045/zbefri.2022.2.313
Zaninović, P. A. (2023). Assessing the effects of hard and soft infrastructure on traditional vs supply-chain trade: the case of Central and Eastern EU member states (CEMS). Applied Economics. https://doi.org/10.1080/00036846.2023.2167918
Ambroziak, U. (2017). Determinants of trade in value added: the case of the Central and Eastern European Countries. International Journal of Business & Technology, 6(1), 1–7. https://doi.org/10.33107/ijbte.2017.6.1.10
Anderson, J. E., & van Wincoop, E. (2004). Trade costs. Journal of Economic Literature, 42(3), 691–751. https://doi.org/10.1257/0022051042177649
Antràs, P. (2020). Conceptual aspects of global value chains. The World Bank Economic Review, 34(3), 551–574. https://doi.org/10.1093/wber/lhaa006
Antràs, P., & Gortari, A. (2020). On the geography of global value chains. Econometrica, 88(4), 1553–1598. https://doi.org/10.3982/ECTA15362
Arvis, J. F., Ojala, L., Wiederer, C., Shepherd, B., Raj, A., Dairabayeva, K., & Kiiski, T. (2018). Connecting to compete 2018. https://doi.org/10.1596/29971
Baier, S. L., & Bergstrand, J. H. (2007). Do free trade agreements actually increase members’ international trade? Journal of International Economics, 71(1), 72–95. https://doi.org/10.1016/j.jinteco.2006.02.005
Behar, A. & Manners, P. (2008). Logistics and export (CSAE Working paper series 2008-13). Centre for the Study of African Economies, University of Oxford.
Bugarčić, F. Ž., & Skvarciany, V. (2023). Logistics Influence on FDI: “hard” versus “soft” Infrastructure Components. European Journal of International Management. https://doi.org/10.1504/EJIM.2022.10051618
Bugarčić, F., Skvarciany, V., & Stanišić, N. (2020). Logistics performance index in international trade: case of Central and Eastern European and Western Balkans countries. Business: Theory and Practice, 21(2), 452–459. https://doi.org/10.3846/btp.2020.12802
Caraballo, J. G., & Jiang, X. (2016). Value-added erosion in global value chains: An empirical assessment. Journal of Economic Issues, 50(1), 288–296. https://doi.org/10.1080/00213624.2016.1148991
Carpa, N., & Martínez-Zarzoso, I. (2022). The impact of global value chain participation on income inequality. International Economics, 169, 269–290. https://doi.org/10.1016/j.inteco.2022.02.002
Çelebi, D. (2017). The role of logistics performance in promoting trade. Maritime Economics & Logistics, 21(3), 307–323. https://doi.org/10.1057/s41278-017-0094-4
D’Aleo, V., & Sergi, B. S. (2017). Does logistics influence economic growth? The European experience. Management Decision, 55(8), 1613–1628. https://doi.org/10.1108/md-10-2016-0670
Damijan, J., Kostevc, R., & Rojec, M. (2018). global supply chains at work in Central and Eastern European countries: Impact of foreign direct investment on export restructuring and productivity growth. Economic and Business Review, 20(2). https://doi.org/10.15458/85451.66
Gani, A. (2017). The logistics performance effect in international trade. The Asian Journal of Shipping and Logistics, 33(4), 279–288. https://doi.org/10.1016/j.ajsl.2017.12.012
Hafner, K. A., Kleinert, J., & Spies, J. (2022). Endogenous transport costs and international trade. The World Economy, 46(3), 560–597. https://doi.org/10.1111/twec.13337
Hausman, W. H., Lee, H. L., & Subramanian, U. (2013). The impact of logistics performance on trade. Production and Operations Management, 22(2), 236–252. https://doi.org/10.1111/j.1937-5956.2011.01312.x
He, Y., Wu, R., & Choi, Y. J. (2021). International logistics and cross-border e-commerce trade: Who matters whom? Sustainability, 13(4), Aricle 1745. https://doi.org/10.3390/su13041745
Head, K., & Mayer, T. (2014). Gravity equations: Workhorse, toolkit, and cookbook. In Handbook of international economics, (pp. 131–195). Elsevier. https://doi.org/10.1016/b978-0-444-54314-1.00003-3
Host, A., Pavlić Skender, H., & Zaninović, P. A. (2019). Trade logistics – the gravity model approach. Zbornik Radova Ekonomskog Fakulteta U Rijeci: Časopis Za Ekonomsku Teoriju I Praksu/Proceedings of Rijeka Faculty of Economics: Journal of Economics and Business, 37(1), 327–342. https://doi.org/10.18045/zbefri.2019.1.327
Hummels, D. (2001). Time as a trade barrier (GTAP Working Papers). Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, United States. https://doi.org/10.21642/GTAP.WP18
Hummels, D. L., & Schaur, G. (2013). Time as a trade barrier. American Economic Review, 103(7), 2935–2959. https://doi.org/10.1257/aer.103.7.2935
Lasinio, C. J., Manzocchi, S., & Meliciani, V. (2016, January 1). Intangible assets and participation in global value chains: An analysis on a sample of European Countries. https://econpapers.repec.org/RePEc:lui:lleewp:16129
Koopman, R., Powers, W., Wang, Z., & Wei, S. J. (2010). Give credit where credit is due: Tracing value added in global production chains. https://doi.org/10.3386/w16426
Koopman, R., Wang, Z., & Wei, S. J. (2014). Tracing value-added and double counting in gross exports. American Economic Review, 104(2), 459–494. https://doi.org/10.1257/aer.104.2.459
Korinek, J. & Sourdin, P. (2011). To what extent are high-quality logistics services trade facilitating? (OECD Trade Policy Papers, No. 108). OECD Publishing, Paris. https://doi.org/10.1787/5kggdthrj1zn-en
Kowalski, P., Lopez Gonzalez, J., Ragoussis, A., & Ugarte, C. (2015). Participation of developing countries in global value chains (OECD Trade Policy Papers No. 179). OECD Publishing, Paris.
Luttermann, S., Kotzab, H., & Halaszovich, T. (2020). The impact of logistics performance on exports, imports and foreign direct investment. World Review of Intermodal Transportation Research, 9(1), 27. https://doi.org/10.1504/WRITR.2020.106444
Manova, K., & Yu, Z. (2016). How firms export: Processing vs. ordinary trade with financial frictions. Journal of International Economics, 100, 120–137. https://doi.org/10.1016/j.jinteco.2016.02.005
Gomes Nogueira, C., Padilla-Pérez, R., & Villarreal, F. G. (2017). Value chain selection and industrial policy. https://doi.org/10.18356/55424b04-en
Marti, L., Puertas, R., & Garcia, L. (2014). Relevance of trade facilitation in emerging countries’ exports. The Journal of International Trade & Economic Development, 23(2), 202–222. https://doi.org/10.1080/09638199.2012.698639
Noguera, G. (2015, January 1). Trade costs and gravity for gross and value added trade. https://www.semanticscholar.org/paper/Trade-Costs-and-Gravity-for-Gross-and-Value-Added-Noguera/72214dcb638cb4299b85840333ce707594a7f88f
OECD. (2013). Knowledge-based capital and upgrading in global value chains. In Supporting investment in knowledge capital, growth and innovation (pp. 215–252). https://doi.org/10.1787/9789264193307-9-en
Park, S. (2020). Quality of transport infrastructure and logistics as source of comparative advantage. Transport Policy, 99, 54–62. https://doi.org/10.1016/j.tranpol.2020.07.016
Pomfret, R., & Sourdin, P. (2018). Value chains in Europe and Asia: Which countries participate? International Economics, 153, 34–41. https://doi.org/10.1016/j.inteco.2016.11.002
Rezaei, J., van Roekel, W. S., & Tavasszy, L. (2018). Measuring the relative importance of the logistics performance index indicators using Best Worst Method. Transport Policy, 68, 158–169. https://doi.org/10.1016/j.tranpol.2018.05.007
Ruta, M. (2017, September 13). Preferential trade agreements and global value chains: Theory, evidence, and open questions. SSRN. https://doi.org/10.1596/1813-9450-8190
Saslavsky, D., & Shepherd, B. (2014). Facilitating international production networks: The role of trade logistics. The Journal of International Trade & Economic Development, 23(7), 979–999. https://doi.org/10.1080/09638199.2013.811534
Stehrer, R., & Stöllinger, R. (2014, February 15). The Central European manufacturin core: What is driving regional production sharing? (FIW-Research Reports No. 2014/15-02). http://hdl.handle.net/10419/121234
Vrh, N. (2018). What drives the differences in domestic value added in exports between old and new E.U. member states? Economic Research-Ekonomska Istraživanja, 31(1), 645–663. https://doi.org/10.1080/1331677X.2018.1438910
Wang, Z., Wei, S. J., Yu, X., & Zhu, K. (2017). Measures of participation in global value chains and global business cycles (NBER Working paper 23222). https://doi.org/10.3386/w23222
Kejžar, K. Z., Velić, A., & Damijan, J. P. (2022). COVID‐19, trade collapse and GVC linkages: European experience. The World Economy, 45(11), 3475–3506. https://doi.org/10.1111/twec.13314
Silva, J. S., & Tenreyro, S. (2006). The log of gravity. The Review of Economics and statistics, 88(4), 641–658. https://doi.org/10.1162/rest.88.4.641
Zaninović, P. A., Zaninović, V., & Skender, H. P. (2021). The effects of logistics performance on international trade: EU15 vs CEMS. Economic Research-Ekonomska Istraživanja, 34(1), 1566–1582. https://doi.org/10.1080/1331677X.2020.1844582
Zaninović, P. A. (2022). Do ICT and technological development facilitate supply chain trade?. Zbornik Radova Ekonomskog Fakulteta U Rijeci: Časopis Za Ekonomsku Teoriju I Praksu/Proceedings of Rijeka Faculty of Economics: Journal of Economics and Business, 40(2), 313–327. https://doi.org/10.18045/zbefri.2022.2.313
Zaninović, P. A. (2023). Assessing the effects of hard and soft infrastructure on traditional vs supply-chain trade: the case of Central and Eastern EU member states (CEMS). Applied Economics. https://doi.org/10.1080/00036846.2023.2167918