Tracing the impact of global value chain participation on CO2 emissions under the tech-nology gap heterogeneity: Evidence from emerging and developing countries

Research background: The issue of carbon dioxide (CO2) emissions, recognized as one of the major drivers of environmental degradation, has attracted considerable attention from academic researchers, policymakers, and professionals in relevant fields. Based on the existing research, countries’ pollution levels are shaped by a combination of factors, including their participation in global value chains (GVCs) and degree of technological advancement. Still, relatively little is known about the mutual interdependence of these factors in determining CO2 emissions, which creates the research gap that we address in this paper. Purpose of the article: The aim of this study is to broaden understanding of the impact of GVC involvement on CO2 emissions in emerging and developing countries. We examine the impact of GVC participation on CO2 emissions conditional on a country’s distance to the world’s technological frontier. The rationale is that a country’s technological advancement may underpin the environmental impact of GVC participation. We claim that the adoption of technology by less developed countries via GVCs is conditioned by their absorptive capacity, which is determined by their initial level of technological development. Methods: To investigate this issue, we employ the Arellano-Bond generalized method of moments (GMM) estimator and four patent-based technology gap indicators. The utilized data cover 90 emerging and developing countries. Findings & value added: Our study demonstrates that a country’s technological advancement is the key factor that conditions the acquisition of environmental benefits of GVC participation. We find that countries with shorter distances to the world’s technological frontier enjoy a decline in CO2 emissions as their GVC involvement increases. At the same time, countries that are further away from the technological leader may not be able to experience CO2 reduction with increased GVC integration due to their inadequate absorptive capacity, which hampers the environmental benefits related to technology diffusion through GVCs.