Participation in global value chains and rent sharing at small firms in Vietnam

Abstract

It is well documented that firms that participate in global value chains (GVCs) are larger and more productive, maintaining higher profitability compared to those without such connections. This paper asks the novel question of whether higher profits being connected to GVCs are shared with employees in the form of better pay. We investigated this rent sharing, using a matched employer-employee dataset of Vietnamese small firms surveyed between 2011 and 2015. There is no evidence for the presence of rent sharing in GVC-participating firms. We take this as evidence that GVC firms provide both higher wages and insurance against wage shocks.