The analysis of Georgia’s participation in Global Value Chains
The analysis of Georgia’s participation in Global Value Chains

Summary/Abstract: The paper aims to study Georgia’s positions in global value chains (GVCs), which represents a connecting channel to international markets and sources of productivity improvement. It analyzes backward and forward linkages and value-added trade to identify the main determinants of GVC integration. The structural gravity model for exported value-added is applied to the panel of 26 countries over 1997-2022, incorporating standard gravity components and additional policy-related and sector-specific regressors. The results show that Georgia’s overall position in GVCs is weak and is under the influence of short-term factors rather than deep integration forces. The analysis of the determinants of value-added trade has demonstrated that larger GDP and the quality of human capital are powerful drivers of Georgia’s participation in GVCs. The findings suggest that Georgia’s priorities should involve industrial policies targeted at high value-added creation, investments in skills development and industrial upgrading for enhanced GVC integration.

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