This paper draws on unique datasets – the World Bank Labor Content of Exports (LACEX) and Export Value Added (EVA) databases – to explore how different varieties of trade integration through global value chains (GVCs) may result in different outcomes in the labor market. It highlights five key findings: (i) The net association between trade integration and labor demand is positive, suggesting that while high shares of GVC integration is negatively correlated with labor demand, this is overcome by the larger aggregate output that results; (ii) Exporting (including intermediates) shows a positive correlation with the labor share in the direct export sector, while buying in GVCs is associated with positive returns to labor in the supplying sectors; (iii) Greater use of foreign inputs as a buying-side GVC integrator has overall benefits in terms of the returns to labor (relative to capital), but is likely to be associated with greater polarization of those returns, with skilled workers benefiting over unskilled; (iv) While results generally hold across sectors and income levels, we find evidence of a U-shaped relationship, whereby low and (especially) high income countries appear to have a stronger association between trade integration and labor market outcomes relative to middle income countries; and, (v) trade policy appears to play a significant role in mediating the relationship between trade and labor demand, while the mediating role of labor policy varies across the trade.
Details
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Author
Farole,Thomas, Hollweg,Claire Honore, Winkler,Deborah Elisabeth
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Document Date
2018/07/16
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Document Type
Working Paper (Numbered Series)
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Report Number
129143
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2018/08/02
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Disclosure Status
Disclosed
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Doc Name
Trade in Global Value Chains : An Assessment of Labor Market Implications
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Keywords
skilled labor; labor share; labor market outcome; labor demand; relative demand; trade integration; foreign value added; trade and labor markets; domestic value added; labor value; export sector; global value chain; country income group; cross-country sample; demand for labor; effect of trade; reallocation of resource; measure of trade; Labor Market Flexibility; quality of education; elasticity of substitution; share of labor; share of export; trade and investment; unit of output; high income economy; deep trade integration; wage effect; share of trade; labor market policy; rapid technological progress; higher value added; scale production; terms of trade; real wage growth; share of income; local labor market; net job loss; wages for low; method of production; number of jobs; impact of service; scale of production; special economic zone; labor market impact; propensity score matching; national income accounting; factor of production; supply of land; privileges and immunity; negative effect; advanced economy; conceptual framework; labor outcomes; Trade Policy; gross exports; Trade Policies; imported inputs; fixed effect; factor share; industrialized country; export share; summary statistic; Industrialized countries; technological change; empirical specification; earnings loss; positive impact; high share; econometric study; total output; employment effect; trade measure; manufacturing industry; future research; intermediate input; manufacturing sector; total employment; substitution effect
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Citation
Farole,Thomas Hollweg,Claire Honore Winkler,Deborah Elisabeth
Trade in Global Value Chains : An Assessment of Labor Market Implications (English). Jobs Working Paper,Issue no. 18 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/109621533186813850/Trade-in-Global-Value-Chains-An-Assessment-of-Labor-Market-Implications