Position in global value chains: The impact on wages in Central and Eastern European countries

This paper examines the relationship between the relative position of industries in Global Value Chains (GVCs) and wages in ten Central and Eastern European countries in the period 2005-2014. We combine GVC measures of global import intensity of production, upstreamness (distance from final use), and the length of the value chain (based on WIOD) with micro-data on workers from EU-SILC. We find that the wages of CEEC workers are higher when their industry is at the beginning of the chain, far from final demand (high upstreamness) or at the end (low upstreamness - sectors close to final demand) than in the middle. Secondly, wage changes depend on the interplay between upstreamness and GVC intensity. In sectors close to final demand, greater production fragmentation, measured either by global import intensity or by vertical specialisation, is associated with lower wages. Higher upstream, this effect is not sustained.