The Role of Global Value Chains during the Crisis: Evidence from Spanish and European Firms

This paper analyzes the role that global value chains (GVC) have played during the sovereign debt crisis in Europe, and the key policy challenges that Spain faces. First, we provide a comparative analysis of the export performance and FDI activities of Spanish firms, using the firm-level information of the EFIGE dataset. Then, we use input-output tables from the WIOD database to identify the industries whose participation in GVCs should be promoted since they retain a larger share of domestic value added. Finally, we analyze the capacity of GVCs to amplify or act as built-in stabilizers following economic downturns. To do so, we compute the first round impact on Spanish gross exports and domestic value added of a 10% increase in final demand in selected areas of the world. Spain's gross exports would be worth 2.28% of GDP while the domestic value added from export would grow by 2.34%, which suggests that GVCs act as stabilizers since the promote more the domestic value added components.