for lead firms in rich countries, at the expense of a lower share of the gains from GVCs accruing to producers in less developed economies. Furthermore, digital platforms themselves have been accumulating vast amounts of information on the users of their platforms, and this certainly enhances their ability to use this information to their advantage, either by locking in buyers with particularly well tailored recommendations, or by price discriminating in particularly effective ways. As a result, digital platform firms also pose new challenges for regulators seeking to ensure fair competition and prevent abuse of market power.

The specific features of relational GVCs emphasized in section 4 suggest that the effi ciency and distributional consequences following from the increasing adoption of digital technologies might not be orthogonal to each other. More specifically, because verification and monitoring serve as a substitute for the need for implicit contract enforcement, they may lead to an erosion of the “stickiness” of GVC relationships. This in turn may well generate negative effects on the productivity of firm-to-firm transactions. Indeed, recent work by Machiavello and Morjaria (2019) suggests that in coffee value chains in Rwanda, increased competition was associated with a lower use of relational contracts between mills and farmers, and this breakdown in relational contracts lowered mills’effi ciency and output quality.

# 5.2 Automation and 3D Printing

Although new technologies have the potential to raise productivity, they sometimes can prove to be quite disruptive, especially when they lead to a reduction in the demand for workers. The example of industrial automation and robotics is a case in point. At first glance, automation constitutes an alternative to offshoring for firms in rich countries seeking to lower their labor costs. Because automation and offshoring appear to be substitutes, one would then expect improvements in automation to lead to an increasing amount of reshoring over time. This fact might be particularly concerning to less developed economies, which might view automation as a threat to their ability to leverage their cheap labor to get a foot on the door of GVCs. These fears might be compounded by the fact that large multinational companies typically design their production processes with their home market factor prices in mind, and might then impose these same production processes possibly involving large amounts of automation, in their host countries (see Rodrik, 2018). In other words, participation in GVCs might lead to the diffusion of automation to less developed economies, thereby aggravating the reduction in demand for labor caused by automation in less developed economies.

The substitutability between automation and offshoring is, however, much less clear-cut in practice. Automation by firms in developed countries tend to decrease their costs, enhance their productivity and thereby increase their demand for intermediate inputs, many of which continue to be sourced from less developed economies. Whether automation increases or reduces the extent to which firms in less developed economies participate in GVCs is thus an empirical matter. Building on recent work by Artuc et al. (2018), Chapter 6 of the 2020 World Development Report presents preliminary evidence suggesting that automation in industrial countries appears to have, in fact, 26