This paper empirically investigates the effect of a rise in the global value chain (GVC) on the industry-level efficiency of resource allocation for Korea, with focus on various channels through which a rise in GVC can increase competition among firms and hence induce resources to be allocated more efficiently across firms. We empirically investigate the relationship between the industry-level GVC (measured as the foreign firms’ share of value added) and the industry-level allocative inefficiency that is measured as the dispersion of the marginal revenue product of capital (MRPK) as in the model in Hsieh and Klenow (2009). We calculate the average (across industries) of the industry-level MRPK dispersion conditional on the industry’s GVC being higher vs. lower than the median and compute its difference between the two, which is calculated further conditional on whether the industry is export (import) intensive or not. In this way, we calculate the difference-in-difference of the MRPK dispersion associated with a rise in GVC for the export (import)-intensive industry relative to that for the non-export (non-import) intensive industry. Moreover, we also calculate the aforementioned difference-in-difference of the MRPK dispersion conditional on high-TFP firms and compare it to the counterpart unconditional on TFP (triple-difference estimate). A rise in GVC is associated with a reduction in the MRPK dispersion in the export-intensive industry relative to that in the non-export intensive industry. Similarly, a rise in GVC is also associated with a reduction in the MRPK dispersion in the import-intensive industry relative to that in the non-import intensive industry.  The negative association between GVC and MRPK dispersion in the export-intensive industry (relative to that in the non-export intensive industry) is of magnitude disproportionately greater for the high-TFP firms. By contrast, the negative association between GVC and MRPK dispersion in the import-intensive industry (relative to that in the non-import intensive industry) is of magnitude disproportionately smaller for the high-TFP firms.