The rise of global value chains

Fragmentation of global production is not a new phenomenon, but its importance has been growing over time. This trend has resulted from technological innovations in communication and transportation, which have lowered coordination costs, allowing countries to specialize in production of specific tasks or components, rather than entire final products. This section looks at how the nature, scale and scope of global value chains (GVCs) have changed dramatically during the last two decades. It examines how GVCs can offer developing countries opportunities to integrate into the world economy at lower costs but highlights that gains from GVC integration are not automatic. It considers the risks posed by GVC participation and how various policies are correlated with countries’ participation in GVCs.