Authorities and hubs in global value chains: exploring the role of network centrality

This paper explores the evolution of global value chains (GVCs) from 1995 to 2020 to assess the changes that have taken place during the last decades. Using country-sector data from the OECD’s TiVA database, we apply network techniques and graph theory to characterize the structure of the GVC network. We are interested in comparing the network at different moments in time to assess how its structure has evolved, and which countries and sectors -and how- participate in the network. To do so, we compute centrality metrics to identify countries and country-sectors’ position within these global production networks. Using the weighted hyperlink-induced topic search (HITS) algorithm, we identify key hubs and authorities in the GVC network: a hub is relevant supplier that is connected with relevant buyers, while an authority is a relevant buyer which is itself connected with relevant suppliers. Additionally, we also examine if the position of country-sectors in the GVC network matters: we conduct panel regressions to assess if changes in network centrality have an impact on upgrading in GVCs, as measured by changes in the domestic value-added content of gross exports. Our results suggest that centrality plays an important role, especially as a buyer: according to our preferred estimation, a 1 percentage point increase in a country-sector’s authority score leads to an increase in the rate of growth of domestic value added embodied in exports of 0.39 percentage points, whereas increases in the hub score boost domestic value added in exports by 0.14 pp. Being well connected to the sources of value-added seems to play a more important role in benefiting from GVC participation. JEL codes: F14, F60