the use of high-quality services, liberalizing the service sector, removing various types of policy barriers related to services and strengthening the institutional framework might allow India and other developing countries to strengthen their GVC participation and profit from the associated economic benefits.

Figure 1: GVC Participation and Economy-wide Productivity (2015-2016) <!-- Start of picture text --> GVC participation and Industry productivity<br>GVC participation and Services productivity<br>Coefficient 2.312; R2 0.09; **<br>Coefficient 2.486; R2 0.14; ***<br>SAU IRL SAU SGP<br>USA CHE IRL<br>CHE NOR SGP JPNAUSGBRESPGRCITASWEHKGFRADEUNORFINDNKAUTNLD BEL MLT<br>USA ISRJPNAUSGBRESPGRCITAISLSWEFRADEU FINDNKAUTNLDKORBELMYS HRVTURISR ISLLVAPRTROUCYPPOLLTUESTKORSVNMYSCZEHUN SVK<br>CRI HRVTURCOLCHNIDNPERRUSLVAKAZHKGZAFMARPRTCHLROUPHLCYPMEXTHAPOLLTUESTBGRSVN CZEHUN SVKMLT CRI BRACOLINDCHN PERRUSKAZZAFMARCHLTUNMEXTHA BGR<br>IDN PHL<br>BRA TUN<br>IND<br>ARG<br>ARG<br>.2 .3 .4 .5 .6 .7 .2 .3 .4 .5 .6 .7<br>GVC participation (2015) GVC participation (2015)<br>6<br>5<br>4<br>3<br>2<br>5<br>4<br>3<br>2<br><!-- End of picture text --> Source: OECD TiVA; WDI; Author calculations<sup>1</sup> Despite the recognition of the importance of services, studies on the relationship of the use of service inputs, the depth of GVC integration and firm productivity are few in number. Our study adds to the empirical evidence on GVC integration, service input use and firm performance using detailed firm-level data from India for the period 1990-2017. The study classifies the depth of GVC participation following Veugelers et al (2013) and Gereffi and Fernances-Stark (2016) and looks at different type of service inputs, i.e., the composition of services as well as the origin of services. Indian firms integrated in GVCs play an important role in India’s economy, contributing a disproportionate share of output and exports. Due to its rapid economic progress, its successful market liberalization and integration into the global economy and its recent reforms in the service sector, India offers an excellent case study to evaluate the relation between service inputs, GVC participation and firm productivity. The paper complements existing work on GVCs in India such as Goldar et. al (2018) and Banga (2016).

We estimate the productivity premium associated with varying depths of GVC integration and different intensities and types of services used as inputs. First, GVC integration is associated with higher productivity levels. Firms in GVCs have a productivity premium between 13 and 22 percent relative to domestic firms. The productivity premium increases with the depth of integration into GVCs - firms integrated at an intermediate and high level have a much higher productivity premium relative to firms participating in GVCs in a limited or low level. Second, there is variation across industries, with the productivity premium

> 1 Note: GVC participation is the ratio of a country’s GVC exports to total exports where GVC exports include the foreign valueadded content of exports and the domestic value-added content of exports that are re-exported by the importing country to a third country. Productivity here refers to labor productivity in PPP terms.

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