Like many emerging economies, South Africa has identified exports as an engine for more inclusive, job-intensive growth. However, employment growth did not follow the substantial export growth that South Africa experienced in the 2000s.
... See More + This paper uses a newly developed World Bank database -- the Labor Content of Exports -- to show that the composition of South Africa's export growth helps to understand the weak relationship between export and employment growth. Minerals exports, which propelled export as well as wage growth, are not job intensive and as a result supported far less job growth. Minerals have also increasingly become an enclave sector with few backward linkages to the domestic economy. In contrast, manufacturing exports support jobs and wages primarily in input-providing sectors, where indirect manufacturing employment is nearly 4.5 times greater than direct manufacturing employment. The paper also documents a shift in the labor content of global value chain–intensive manufacturing sectors away from direct manufacturing to indirect services. Such a shift has been biased toward skilled labor. As a results of these trends, labor in services sectors has been the main beneficiary of South Africa's export growth, absorbing more than half of the growth in wage income from exports over the 2000s, primarily by supplying inputs to other sectors' exports.
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Policy Research Working Paper WPS8037 APR 25, 2017
Vietnam has emerged as an Asian manufacturing powerhouse, carving out a role for itself within global value chains (GVCs). By specializing in assembly functions on behalf of primarily foreign firms, Vietnam has markedly increased its domestic value added, as reflected by its gross exports, which have grown by 16.6 percent annually between 1995 and 2011.
... See More + This export-oriented development strategy has created jobs, propelled economic growth, and reduced poverty. As successful as Vietnam has been, within the context of GVCs, its specialization has been in low value-added,end-production activities. Its challenge is to move up the value chain into higher value-added functions. Even more ambitious would be to grasp the opportunity to become an originator of products by nurturing a nascent set of domestic firms that have the potential to carve out an “invented in Vietnam” niche in local, regional, and global markets. In short, Vietnam is at a crossroads. It can continue to specialize in low value-added assembly functions, withindustrialization occurring in enclaves with little connection to the broader economy or society; or it can leverage the current wave of growth to diversify and move up the chain into higher value-added functions. Success will require Vietnam’s policy makers to view the processes of development differently and to take new realities of the global economy more fully into account.Vietnam at a Crossroads: Engaging in the Next Generation of Global Value Chains identifies policies and targeted interventions that will drive development by leveraging GVC participation while also taking into account major trade policy shifts and rapid technological advances. Readers will gain a strong understanding of Vietnam’s current and potential engagement with GVCs and will learn about strategic policy tools that can help developing countries achieve economic prosperity in the context of compressed development. Its findings will be of particular interest to policy makers, development practitioners, and academics.
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The current downturn in commodity prices provides an opportunity for Indonesia to shift away from its dependence on commodity-driven growth towards higher value-added activities in manufacturing and services.
... See More + However, Indonesia faces both global and structural challenges in making this transition. Global challenges include competition from regional trade agreements, especially the TPP, but also from structurally lower global trade growth. In addition, Indonesia’s manufacturing sectors have also been losing competitiveness to regional competitors, while most job creation in the 2000s took place in low productivity sectors. This report aims to show the patterns of economic transformation in Indonesia in the past decade and a half, especially in terms of jobs and employment. The report highlights barriers to labor movement and macroeconomic sources of demand for labor. The report seeks to contribute to the design of a jobs strategy that emphasizes the transition of workers from low to high productivity sectors. While Indonesia has, so far, relied on job creation in low-productivity, and even vulnerable, employment, future challenges would require the country to shift to higher productivity and quality jobs.
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This note looks at the services sector and its dual role for Nepal: as a direct source of exports, and as a provider of key inputs for other sectors of the economy.
... See More + It identifies sources of potential for services exports, and key obstacles for improved efficiency in the sector. It also provides some policy recommendations to alleviate the observed obstacles, and presents examples of good practices from across the world in terms of services trade performance and reforms. Three of the 12 sectors identified in Nepal’s National Trade Integration Strategy 2015 (NTIS 2015) are services-related. This note assesses Nepal’s trade potential in services, and identifies actionable policy measures that are needed for Nepal to achieve this potential. The framework used to assess Nepal’s trade potential in services starts from the idea that services play a dual role for building export competitiveness in the Nepalese economy. The remainder of this note proceeds as follows. Section I analyzes the direct services export performance of Nepal’s exports relative to comparator countries, when measuring exports in gross or value added terms. It takes a detailed look at performance of Nepal’s priority export potential services sectors. Section II analyzes the indirect services export performance, when services are used as inputs for other sectors’ exports. It takes a perspective of services for cross-cutting export competitiveness. This analysis is undertaken in value-added terms. Section III details the policy implications that arise from this analysis, taking both a cross-cutting and sector-specific point of view.
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This paper develops a novel methodology to measure the quantity of jobs and value of wages embodied in exports for a large number of countries and sectors for intermittent years between 1995 and 2011.
... See More + The resulting Labor Content of Exports database allows the examination of the direct contribution of labor to exports as well as the indirect contribution via other sectors of the economy for skilled and unskilled labor. The analysis of the new data sets documents several new findings. First, the global share of labor value added in exports has been declining globally since 1995, but it has increased in low-income countries. Second, in line with the standard Hecksher-Ohlin trade model, the composition of labor directly contained in exports is skewed toward skilled labor in high-income countries relative to developing countries. However, that is not the case for the indirect labor content of exports. Third, manufacturing exports are a key source of labor demand in other sectors, especially in middle- and low-income countries. And the majority of the indirect demand for labor spurred by exports is in services sectors, whose workers are the largest beneficiaries of exporting activities globally. Fourth, differences in the labor value added in exports share across developing countries appears to be driven more by differences in the composition of exports rather than in sector labor intensities. Finally, average wages typically increase rapidly enough with the process of economic development to more than compensate the loss in jobs per unit of exports. The paper also includes the necessary information to build the Labor Content of Exports database from the original raw data, including stata do-files and matlab files, as well as descriptions of the variables in the data set.
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Policy Research Working Paper WPS7615 MAR 28, 2016
The Kenya CEM has five main messages. First, Kenya has performed well in the past decade in terms of economic growth, and modern services are behind the acceleration of growth.
... See More + Expansion in these services, such as financial intermediation and mobile communications have stimulated demand for other services such as trade. The CEM discusses how to maximize the potential of services, especially given that most formal, high quality jobs are created in this sector. Second, agriculture, which still contributes to over a quarter of the economy, and manufacturing have stagnated. The CEM discusses the reasons behind this stagnation, noting that agriculture and manufacturing have not been able to create enough jobs for Kenya’s growing working age population. Most of the jobs are created by the informal economy and are concentrated in low productivity segments of trade, hospitality, and jua kali. Improving the ease of doing business is one way towards job creation and higher productivity. However there is still a need for creating job opportunities for the rural poor, for poverty reduction and achieving shared prosperity. Reviving agriculture, in particular, remains the pathway for poverty reduction. Third, accelerating growth to meet Kenya’s development goals requires technological advances and innovation that raise firms’ productivity. Fourth, achieving rapid growth will require macroeconomic stability to boost investment and savings. And as the government strives to build Kenya’s energy and transport infrastructure, this needs to be complemented with improvements in the public investment management process and better execution. Fifth, the discovery of oil opens a possibility for raising Kenya’s growth. Kenya’s recent oil discoveries, if used prudently, can contribute to achieving the Vision 2030 goals. The World Bank Group is proud of its long-standing relationship with Kenya, and looks forward to continuous collaboration with both National and County Governments and other partners. Working together, Kenya can realize its potential to lift millions of families out of poverty and achieve shared prosperity.
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Based on a series of complementary methodological approaches and datasets implicitly linking trade to jobs, this report paints a mixed picture of Lao PDR’s recent export performance and how this has translated into job creation and improved job quality across the economy.
... See More + The findings of these various analytical approaches provide insight into the potential drivers of Lao PDR’s labor outcomes including the role of exports, and what the government and firms can do to better position Lao producers in external markets so that more and better jobs are created for Lao workers in the future. A key obstacle to attracting investment in high-value manufacturing is the Lao labor force’s low schooling levels. Policies likely to have only modest effects on aggregate welfare and inclusive growth. Policies will need to go beyond the manufacturing sector to address the limited employment and demand spillovers of mining production, and the limited market integration and value addition in agricultural production. It was concluded that Policies to enhance agricultural productivity, job quality and economic opportunities in rural areas will not only foster greater equity, but will also reduce urban-rural distortions and dampen the incentives to migrate.
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Based on a series of complementary methodological approaches and datasets implicitly linking trade to jobs, this report paints a mixed picture of Lao PDR’s recent export performance and how this has translated into job creation and improved job quality across the economy.
... See More + The findings of these various analytical approaches provide insight into the potential drivers of Lao PDR’s labor outcomes including the role of exports, and what the government and firms can do to better position Lao producers in external markets so that more and better jobs are created for Lao workers in the future. A key obstacle to attracting investment in high-value manufacturing is the Lao labor force’s low schooling levels. Policies likely to have only modest effects on aggregate welfare and inclusive growth. Policies will need to go beyond the manufacturing sector to address the limited employment and demand spillovers of mining production, and the limited market integration and value addition in agricultural production. It was concluded that Policies to enhance agricultural productivity, job quality and economic opportunities in rural areas will not only foster greater equity, but will also reduce urban-rural distortions and dampen the incentives to migrate.
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Based on a series of complementary methodological approaches and datasets implicitly linking trade to jobs, this report paints a mixed picture of Lao PDR’s recent export performance and how this has translated into job creation and improved job quality across the economy.
... See More + The findings of these various analytical approaches provide insight into the potential drivers of Lao PDR’s labor outcomes including the role of exports, and what the government and firms can do to better position Lao producers in external markets so that more and better jobs are created for Lao workers in the future. A key obstacle to attracting investment in high-value manufacturing is the Lao labor force’s low schooling levels. Policies likely to have only modest effects on aggregate welfare and inclusive growth. Policies will need to go beyond the manufacturing sector to address the limited employment and demand spillovers of mining production, and the limited market integration and value addition in agricultural production. It was concluded that Policies to enhance agricultural productivity, job quality and economic opportunities in rural areas will not only foster greater equity, but will also reduce urban-rural distortions and dampen the incentives to migrate.
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This report seeks to shed light on the ways in which the services sector has contributed to Lao PDR’s competitiveness and integration into the global marketplace.
... See More + It focuses on two complementary roles that the services sector plays: first, as an avenue for export diversification and growth and, second,by providing inputs into other productive sectors of the economy, such as the manufacturing sector. As economies grow, the importance of the services sector generally increases, but its role as an enabler of other sectors of the economy in moving up the value chain is frequently overlooked. However, the services sector is critical in raising competitiveness of these other sectors to boost growth and create better quality jobs. The main policy recommendations that emerge from this report are aimed at increasing competition in the services sector, reducing distortive regulations, and opening up the sector to foreign participation, building up skills, both at the individual and at the firm level, and investing in hard and soft infrastructure to promote the development of the sector.
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This report seeks to shed light on the ways in which the services sector has contributed to Lao PDR’s competitiveness and integration into the global marketplace.
... See More + It focuses on two complementary roles that the services sector plays: first, as an avenue for export diversification and growth and, second,by providing inputs into other productive sectors of the economy, such as the manufacturing sector. As economies grow, the importance of the services sector generally increases, but its role as an enabler of other sectors of the economy in moving up the value chain is frequently overlooked. However, the services sector is critical in raising competitiveness of these other sectors to boost growth and create better quality jobs. The main policy recommendations that emerge from this report are aimed at increasing competition in the services sector, reducing distortive regulations, and opening up the sector to foreign participation, building up skills, both at the individual and at the firm level, and investing in hard and soft infrastructure to promote the development of the sector.
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The envisioned economic transformation requires a shift from a remittance-fueled growth model to one fueled by productivity and investment. Integration into the global marketplace is a powerful vehicle for increased investment and productivity.
... See More + As a small economy, located within a six-hour flight distance from the fastest-growing markets in the world, Nepal's growth prospects are closely linked to its success in integrating into regional and global marketplaces. The government realizes this and has formulated the National Trade and Integration Strategy (NITS) (Government of Nepal 2015b) that recognizes the firms to better profit from it. The notes included in this report seek to support the government’s strategy by assessing the extent to which Nepal has been able to leverage integration into global markets, and by identifying the opportunities and challenges associated with further integration.
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In the last decades, slow growth and job creation have encouraged emigration, further dampening domestic sources of growth in Nepal. Tepid growth over the past decade, the slowest in the region, has resulted in few jobs being created, leading to more Nepalese workers seeking opportunities abroad.
... See More + Their remittances have helped reduce poverty in the country and finance increasingly large trade deficits. Like other inflows of foreign exchange, remittances have led to an appreciation of the real exchange rate. This has adversely affected export competitiveness and has had no positive effects on productivity (unlike foreign direct investment). This report attempts to determine the extent to which these obstacles can be alleviated by policy decisions, as well as exactly which policy decisions should be prioritized. The policy notes included in this report aim at supporting the National Trade and Integration Strategy (NTIS) through an evidence-based approach. To do so, these notes combine the following elements: (i) existing analysis on Nepal’s competitiveness from different angles (including existing competitiveness assessments on transport, access to finance, the tourism sector, previous trade competitiveness reports, and so forth); (ii) international experience from comparator countries on good practices for trade policy reforms; (iii) new analysis for Nepal, applying cutting-edge methods on a wide set of databases; and (iv) field-level interviews with the private sector, and consultations with donors and the Government of Nepal.
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Increasing the trade integration of developing countries can make a vital contribution to boosting shared prosperity, but it also exposes producers and consumers to exogenous shocks that alter relative prices, sometimes positively and sometimes negatively.
... See More + This paper discusses the short-run effects of trade-related shocks on households to capture the potential welfare impact on the poor. The discussion explores the channels through which trade shocks are transmitted to households in the bottom of the income distribution, namely through consumption, household production, and market-based labor activities. The degree to which price shocks are passed through from borders to point of sale is a key determinant of the gains from trade and the ultimate welfare impact. Trade changes in agriculture directly affect households through their consumption basket. Lower agricultural prices reduce the cost of consumables, but these welfare gains may be offset by lower earnings for households that produce these same goods. Poorer households tend to be net consumers of agricultural products, suggesting a net welfare gain, but agricultural wage workers could suffer from wage cuts. Because poorer households tend to consume relatively fewer nonagricultural products, that is nonessentials, any trade-related shocks to prices of nonagricultural product are likely to be transmitted via labor channels. Despite significant evidence that nonagricultural trade reform ultimately leads to job creation and enhanced productivity, the short-run effects can be mixed. The costs incurred by workers to transition to new jobs slow the adjustment of the economy to a new steady state. Labor mobility costs, which tend to be higher in developing countries and for unskilled workers, reduce the potential gains to trade by diverting labor market adjustment from its most efficient path.
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Policy Research Working Paper WPS7314 JUN 17, 2015
The Service Trade Competitiveness Diagnostic (STDC) Toolkit is part of a larger agenda of trade competitiveness work developed by the World Bank's International Trade Unit in recent years.
... See More + Services are a key input in countries' trade competitiveness, as well as a new source of trade diversification, making it critical to understand what factors and main constraints matter most for services competitiveness. The Toolkit provides a framework, guidelines, and set of practical tools to conduct a thorough analysis and diagnostic of trade competitiveness in the services sector with a methodology that sheds light on a country's ability both to export services and improve its export performance through policy change. This Toolkit is designed to be used in a modular way. Either a full country diagnostic can be undertaken or various parts of the toolkit can be used to address specific questions of interest, whether they pertain to existing services performance, the potential for expansion and growth in services trade, or policy options to increase competitiveness in services trade. The output of an STCD can be used to assess either the overall performance of a country's services sector or the performance of individual sub-sectors. This Toolkit complements the analytical framework for trade in goods provided by the Trade Competitiveness Diagnostic Toolkit (World Bank, 2012), and allows policymakers and experts in developing countries to better integrate services into their overall trade strategies. In addition, it will also be of interest to international organizations and development practitioners in both policymaking institutions and academia.
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Publication 93714 JAN 14, 2015
Hollweg,Claire Honore; Van Der Marel,Erik Leendert; Saez,Juan Sebastian; Taglioni,Daria; Zavacka,VeronikaDisclosed
The LACEX dataset has been recently assembled to compute the (direct and indirect) value of the compensation of employees linked to exports for each sector/country/year.
... See More + The data has been computed on the basis of a panel of global input-output data spanning intermittent years from 1995 to 2007 from the Global Trade Analysis Project (GTAP). This represents a form of social accounting data - a variation on the social accounting matrix (SAM) where incomes are shown in the rows of the SAM while expenditures are shown in the columns. The structure of the data provides a comprehensive and consistent record of national income accounting relationships between different sectors and regions, including intermediate and final demand linkages. This structure of the dataset allows one to obtain the value added content of final output and exports, including its compensation of employees’ component. That includes both the direct and indirect compensation, based on the backward linkages of each sector with the rest of the economy. In order to obtain these labor value added measures, two intermediate multiplier matrixes need to be calculated. The first is the Leontief inverse matrix, which measures the inputs contained in a unit of final output. This matrix contains both direct and indirect inputs. Next, one needs to calculate a matrix which has the compensation of employees’ shares of total output. Using these two matrixes as multipliers one can obtain the compensation of employees’ shares of exports and final outputs. These shares are also split between skilled and unskilled workers.
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This paper explores the impact of structural reforms on a comprehensive set of macro-level labor-market outcomes, including the unemployment rate, the average wage index, and overall and female employment levels and labor force participation rates.
... See More + Together these outcome variables capture the overall health of the labor market and the aggregate welfare of workers. Yet, there seems to be no other comprehensive empirical investigation in the existing literature of the impact of structural reforms at the cross-country macro level on labor-market outcomes other than the unemployment rate. Data were collected from a variety of sources, including the World Bank World Development Indicators, the International Monetary Fund International Financial Statistics, and the International Labor Organization Key Indicators of the Labor Market. The resulting dataset covers up to 88 countries, the majority being developing, for 10 years on either side of structural reforms that took place between 1960 and 2001. After documenting the average trends across countries in the labor-market outcomes up to 10 years on either side of each countrys structural reform year, the authors run fixed-effects ordinary least squares as well as instrumental variables regressions to account for the likely endogeneity of structural reforms to labor-market outcomes. Overall the results suggest that structural reforms lead to positive outcomes for labor. Unlike related literature, the paper does not find conclusive evidence on unemployment. Redistributive effects in favor of workers, along the lines of the Stolper-Samuelson effect, may be at work.
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Policy Research Working Paper WPS7122 NOV 01, 2014
This report analyzes the paths by which developing country labor markets adjust to permanent trade-related shocks. Trade shocks can bring about reallocation of labor between industries, but the presence of labor mobility costs implies economy-wide losses because they extend the period of economic adjustment.
... See More + This report focuses primarily on the adjustment costs faced by workers after a trade shock, because of magnitude and welfare implications and policy relevance. From a policy viewpoint, understanding the relative magnitudes of labor mobility and adjustment costs can help policymakers design trade policies that are consistent with employment objectives, can be complemented by labor policies, or support programs to facilitate labor transitions, or both. To complement and validate the analysis based on structural choice models, the study designed a distinct empirical approach using reduced-form econometric estimation strategies. This approach examines the impact of structural reforms and worker displacement on labor market outcomes. This makes it possible to estimate the time required to adjust to a trade-related shock, but does not assume the rigid underlying relationship inherent in structural models. This report is organized as follows: chapter one gives introduction. Chapter two presents evidence from the literature on the relative magnitude of labor adjustment costs borne by workers and by firms. Chapter three presents a new database of country-level labor mobility cost estimates for both developing and developed economies. Chapter four showcases country case studies in which labor mobility costs vary by industry, firm size, and worker type (for example, informal versus. formal). Chapter five analyzes the impact of structural reforms on aggregate labor market outcomes across countries and the effect of worker displacement due to plant closings on the employment outcomes of individual workers in Mexico. Chapter six concludes with a summary of the main findings about the labor adjustment costs associated with trade-related shocks and a discussion of policy responses internationally.
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Publication 88890 JUN 17, 2014
Hollweg, Claire H.; Lederman, Daniel; Rojas, Diego; Bulmer, Elizabeth RuppertDisclosed
This economic update provides an overview for 2013 and early 2014 in Malaysia and an analysis of structural trends in trade competitiveness. The economy overcame a weak start in 2013 to experience GDP growth through 2014.
... See More + The improved performance was driven mainly by a recovery in exports, including of the long-ailing electrical and electronics sector. The outlook remains favorable and GDP is expected to continue growing through 2015. Growth will be sustained by positive external conditions, with foreign demand outweighing headwinds in domestic demand. Investment and imports of capital goods will remain robust as large projects move forward. Medium-term fiscal consolidation remains on track and the debt-to-GDP ratio has stabilized, but additional spending measures are needed for the Government to meet its 2014 deficit target. The central bank has signaled that it may have to tighten policy to avoid the build-up of financial imbalances. Labor markets are healthy, and Malaysia has enjoyed higher employment levels, real wage gains, and higher labor incomes. External risks to the economic outlook have receded, but the high share of Malaysia's foreign debt means it is sensitive to international volatility. Boosting exports to fully leverage the improved external environment will be critical for sustained growth. The report's analysis of Malaysia's trade competitiveness focuses on its ability to grow exports and the domestic value-added. Malaysia's exports had been faltering since before the Global Financial Crisis. The core electrical and electronics sector declined in the 2000s, and Malaysia's domestic value-added is relatively low due to limited domestic linkages. Exports of services have also lagged and remain an area of significant potential. Restrictive Government policies play a role in hindering export growth, although the Government has recently embarked on a liberalization of service sectors. Improving domestic value-added tasks will require addressing skill gaps. Finally, Malaysia's upcoming chairmanship in ASEAN offers concrete avenues to boost trade competitiveness.
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Despite trade liberalization efforts made by Eurasian countries, the export structure of the region shows significant levels of concentration across export destinations.
... See More + To shed light on this observation, this research analyzes trade policy barriers in Eurasia, East Asia and the Pacific, and the European Union. Using the most recent data from sources including the World Trade Organization, the United Nations, and the World Bank including the Overall Trade Restrictiveness Indices, the Services Trade Restrictions Database, and the Temporary Trade Barriers Database the role of tariffs, non-tariff measures, temporary trade barriers, trade agreements, and trade barriers in services are explored to explain the lack of diversification by destination. Several conclusions can be drawn from the analysis. First, China, Korea, and Japan, as well as the European Union, impose high levels of protection on products of animal origin, which may explain the lack of Eurasian export diversification toward the East Asia and the Pacific and the European Union regions. It also highlights the potential benefits of diversifying the structure of production in Eurasia toward more sophisticated and technologically intensive goods. Second, the East Asia and the Pacific region (especially China) appears to be more protectionist than the European Union, suggesting a greater challenge for Eurasian countries in diversifying exports to the destination. And third, few or no regional trade agreements exist between Eurasian countries and countries in the European Union or East Asia and the Pacific.
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Policy Research Working Paper WPS6434 MAY 01, 2013
