Linking Trade to Jobs, Incomes, and Activities: New Stylized Facts for Low- and Middle-Income Countries

Deborah Elisabeth Winkler, Hagen Kruse, Luis Alejandro Aguilar Luna and Maryla Maliszewska

No 10635, Policy Research Working Paper Series from The World Bank

Abstract: Trade expansion can create more and better jobs. This paper revisits the linkages between trade and jobs, focusing on employment, labor incomes, and job activities across a large sample of countries and sectors over 1995 to 2018. Instrumental variables regressions and new input-output measures of jobs and activities in exports highlight several patterns: Exports and especially imports of intermediate inputs are associated with more jobs and higher incomes, while final imports show weaker correlations. Manufacturing has the biggest potential for job and income creation both directly and indirectly in supplying sectors. As countries move from specialization in commodities to limited manufacturing to advanced manufacturing and services global value chains, export-employment and export-income elasticities increase. Global value chain–intensive developing countries tend to have larger shares of production activities in exports compared to resource-intensive countries. As countries get richer, nonproduction activities in exports, such as support, engineering, and managerial services, become increasingly important. Finally, the paper explores the role of policy for the export job share across countries.

Date: 2023-12-11
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