Edited by Luca Bortolotti, University of Turin and OEET

International trade of food and agricultural commodities has long been attracting the interest of development economists. In the XX century and after the second World War, the main focus was on the role of the nature and direction of these flows in determining the structural features of the economies involved and their mutual relationships. Structuralist economists highlighted the issue of the worsening terms of trade for developing countries. They argued that international trade worked against ‘Third World’ countries that relied on exporting primary products and on importing manufactured goods. They challenged the idea of mutual benefit maintained by the neoclassical theory, argued about an unfair transfer of economic gains. The world economy was made up of a centre and a periphery, and their relations, with the central role of trade, tended constantly to reproduce the conditions of underdevelopment and to widen the gap between the two.

Newsletter n. 20 | December 2021 - Download PDF

By Andrea Coveri[*] and Antonello Zanfei[†]


The rise of global value chains (GVCs) prompted firms to increasingly specialize in specific value chain functions, the latter being conceived as the full set of business activities – from those concerning the conception of goods to the ones relating to their fabrication and commercialization – carried out to develop and bring a product to market (Feenstra, 1998; Sturgeon and Gereffi, 2009). The result has been the emergence of an ever finer international division of labour that occurs mainly at the level of individual production stages within sectors, also called “tasks” (Grossman and Rossi-Hansberg, 2008).

This transformation, together with the increasingly uneven distribution of value across actors performing different business activities, has been often associated with the “smile curve” hypothesis (Shih, 1996; Mudambi, 2008).

However, well-suited empirical analyses on the modern functional specialization of economies and tests of the predictions deriving from the smile curve are still limited in extant literature. The present work takes a step forward in this direction. By focusing on the functional specialization in terms of inward FDIs of more than 100 countries from 2003 to 2018, we provide a novel and systematic test of the “smile curve” on a global scale. Our findings shed new light on global economic asymmetries and the development prospects of emerging and developing economies in the era of GVCs. [1] 

By Ivan Savin[*]


The model of replicator dynamics as an evolutionary theory of competition between firms in economics is widely used. I describe how to test this model based on empirical data, as well as the advantages and disadvantages of these tests. Furthermore, I describe ways on how to improve the model of replicator dynamics taking into account global value chains and using the world input-output database, which helps to obtain more thorough and accurate results.[1] 

By Nora Aboushady[*] and Chahir Zaki[§]


An increasing part of today’s international trade takes the form of Global Value Chains (GVCs). According to the estimations of the OECD, about 70% of international trade involves GVCs, as raw materials, intermediate goods, and services cross the borders several times to be incorporated into the final product.[1]  GVC activities are also affected by the firm’s decision to outsource parts of the production process or invest in other countries where there is a comparative advantage related to costs or factor endowments. GVCs represent therefore a promising opportunity for developing countries to find a place in the international market by producing and exporting along these chains, to attract foreign investments if their markets are competitive, and to harmonize production standards and acquire international certifications. This will help them increase and diversify their exports and export destinations.

The determinants of one country’s participation in GVCs is therefore not only related to its production and export structure, but also to its overall investment climate and trade policy in place (Dovis and Zaki, 2020). The quality of institutions and the prevalence of informal practices and corruption also affect the overall transparency and competitiveness of markets and firms’ potential engagement in GVCs.

The Egyptian case is of particular interest. In fact, the country’s integration in GVCs remains relatively limited. Despite serious investment and trade policy reforms, Egypt -as the rest of the MENA region- continues to perform weakly in international trade. Compared to other regions, the MENA region has a modest share of firms that are large and/or productive enough to engage in GVCs. In this article, we explore the reasons behind Egypt’s weak GVC integration by focusing on trade policy and political connections and propose policy recommendations to overcome these obstacles.


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