Moving Up the Value Chain¤
Ben G. Li
Boston College
Yibei Liu
University of Colorado
This draft: March 16, 2015

Abstract
Three dynamics (task, learning, and wage) determine howthe global value chain evolves
over time. We provide a unified and tractable framework that connects all these dynamics
through general equilibrium effects. The chain dynamics generate productivity gains for
the South through learning-by-doing, as well as for the North through task optimization.
The two productivity gains constitute an increase in total task productivity (TTP) of the
chain. Our framework also sheds light on pivotal policy issues related to offshoring, including
how countriesmove up/down the chain, whether they are better/worse off as they
move, and how various “global flows” such as goods and factors interact. In addition, our
model is helpful for understanding firm-level dynamics and data. (JEL codes: F23, F63,
O14, O33)
Keywords: global value chain, offshoring, learning by doing, trade of tasks
¤