Summary :
Abstract
This study examines the multidimensional impacts of Global Value Chain (GVC) participation and its forward and backward linkages on the social upgrading process, using data from 63 countries over the period (2010–2020) with a special focus on Euro-mediterranean countries . Applying a two-stage least squares (2SLS) estimation method, the analysis highlights both the positive and negative effects of GVC integration on labour wellbeing while adding to the existing literature by measuring social upgrading in terms of four aspects; working poverty, working vulnerability, labour rights and unemployment. The paper further tries to enrich the literature by tackling the different countries absorptive capacities that might control the effectiveness of GVCs in the social upgrading process that includes innovative capacity, human capital capacity and governance capacity by introducing an interaction term between the GVC variable and the different capacities. The main findings show that forward GVC participation enhances labour wellbeing by increasing national compliance with labour rights and reducing unemployment. On the other side, it is found that GVC might lead to unequal impacts, where it works mainly in favour of high skilled labour, while the low skilled labour wages and opportunities fall, hence increasing income inequality and working poverty. In addition, the study highlights the role on innovation capacity and the governance quality in enhancing the implications of GVC for the social upgrading process. It is found that investments in R&D enhances labour rights and reduces working poverty, while the strong regulatory framework is found to be effective in terms of reducing working poverty, unemployment, and vulnerability. Furthermore, the study reveals that investments in human capital may propose challenges due to the mismatch between the educational outcomes and the GVC needs, which results in higher working poverty, unemployment mainly for the less skilled labour. Focusing on the Euro-Mediterranean (Euro-Med) region, the analysis reveals that while GVCs help reduce working poverty and improve labour rights, they also contribute to rising unemployment, particularly in low-skilled sectors like agriculture and textiles.