Global Value Chain Participation and Sustainability Transition: Evidence from Income-Level Heterogeneity

다국어 초록 (Multilingual Abstract)

This study investigates the nonlinear relationship between Global Value Chain (GVC) participation and sustainable development from the perspective of sustainability transition and income- level heterogeneity. Using panel data for 71 countries from 1995 to 2019 and employing the System Generalized Method of Moments (System GMM) estimator, this study analyzes how total, forward, and backward GVC participation affect the Sustainable Development Index (SDI), which integrates both human development and ecological sustainability.
The empirical results reveal substantial heterogeneity across income levels. In the full sample, a significant U-shaped relationship is identified primarily for backward GVC participation, suggesting that the early stages of backward integration may weaken sustainability performance through carbon-intensive industrialization, environmental degradation, and limited domestic value- added creation. However, deeper participation gradually contributes to sustainability recovery through technological upgrading and cleaner production systems.
More importantly, the income-level analysis shows that non-high-income economies exhibit statistically significant U-shaped relationships across total, forward, and backward GVC participation, whereas no significant nonlinear relationships are observed in high-income economies.
These findings suggest that non-high-income economies experience a stage-dependent sustainability transition process during GVC integration, in which sustainability initially deteriorates but gradually improves as industrial capabilities, technological learning, and cleaner production systems accumulate. The turning point analysis further indicates that sustainability recovery emerges at different stages depending on the structure of GVC participation. Backward participation reaches the sustainability recovery stage earlier than forward and total participation, while total GVC participation requires broader structural transformation and institutional upgrading before sustainability gains emerge.
Overall, the empirical results demonstrates that the sustainability effects of GVC participation are nonlinear and fundamentally heterogeneous across income groups, highlighting the need for differentiated GVC and sustainability policies according to countries' stages of economic development.