The Impact of Economic Upgrading on Social Upgrading: Evidence from Thailand’s Processed Food Value Chain
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Abstract
In the global value chains (GVCs) analysis, controversy over the relationship between economic and social upgrading remains. Many studies argue that economic upgrading (it consists of product, process, functional, and inter-sectoral upgrading) does not always generate social upgrading in developing countries, although they are key exporters of traded processed foods. Neglecting labor issues can be a serious problem for the countries as key global buyers pay more attention to these issues. This study examines the impact of economic upgrading on social upgrading in the Thai processed food sector, using the fixed effect regression. The study’s findings show that product upgrading negatively effects social upgrading. This result can explain that the Thai processed food sector tends to become engaged in a ‘race to the bottom’. They attempt to reduce their product costs (i.e., lowering wages) to keep competitiveness in global markets. In contrast, the lagged variable of function upgrading is positively significant for social upgrading. The key recommendation of the study is that private firms in the Thai processed food sector need to pay more attention to social upgrading. Particularly, all stakeholders in the sector should collaborate to create policies to support social upgrading in the Thai processed food sector.
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