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Trade in Global Value Chains : An Assessment of Labor Market Implications (English)

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.

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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