Capturing the jobs from globalization: trade and employment in global value chains

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With the steady growth of global value chains (GVCs), each country’s trade now has a more complex relationship with the international division of labor. We decompose the employment effects of a country’s trade into five components, specifically the labor content (1) in exports, (2) in imports, (3) in the import content of exports, (4) in the export content of imports and (5) in intermediates contained in imports. The last three components relate strictly to a country’s participation in GVCs. With the availability of World Input-Output Database (WIOD), we are able to compute the amount of employment generated by each component for 39 countries over 1995- 2009. On the aggregate level, final goods trade generated demand for about 538 million jobs in 2009, and GVC trade produced demand for about 88 million jobs. The countries with the greatest GVC-based labor demand are Germany, the US, China, the Netherlands and France. The only emerging developing economy that comes close to them in this respect is China. The countries with the largest positive difference between domestic and foreign labor demand are China, India, Indonesia and Brazil. On the other hand, the countries with greatest negative difference between domestic and foreign labor demand are the US, Germany and Japan. For the full sample in 2009, the import content of exports led to the demand for about 44 million jobs. Third-party intermediates contained in imports generated labor demand of about 39 million jobs. And the export content of imports created demand for about 5 million jobs. Using the data on ‘hours worked by skill type’ in the Social Economic Accounts, we find that, on a global scale, vertical specialization contained significantly more medium-skill and low-skill than high-skill labor content.