Trade and Employment in a Vertically Specialized World

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With the steady growth of global production networks, each country’s trade now has a more complex relation to the international division of labor. This paper decomposes 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 from a third country. The last three components are strictly due to a country’s participation in global production networks. Based on the countries included in the panel, the analysis shows that in 2009 about 88 million jobs were generated worldwide through their participation in global production networks (GPN) trade, which is about 14 per cent of the total number of jobs generated by international trade. Countries that demanded the most labor as a result of GPN trade are the large developed economies with the exception of China. With regard to the import content of exports, the analysis shows that in 2009, it led to the demand for about 44 million jobs within the 39 countries. Third-country 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.