Value Chains

Summaries This article starts by reviewing what economists can learn from work on value chains by other social scientists, and then considers what economics may have to offer both in understanding value chains and in designing policies related to them. In terms of economic accounting, the article reviews the connections between value chains and input?output tables, between the well?being of firms and of people, and between real wages and money wages. In terms of economic causation, it explores the relevance to value?chain analysis of two theories of comparative advantage. It also asks about the circumstances in which government intervention to upgrade firms would benefit a country’s unskilled workers or could be justified on economic grounds.