Skill-based functional specialization in trade: an input-output analysis of multiscalar value chains in Brazil

Sophisticated spatial labour markets can promote better opportunities for functional upgrading in value-added trade. This paper estimates the skill-based functional specialization in Brazilian labour factor content in trade in value-added (LTiVA), considering different geographical scales. We combined an interregional input-output model for Brazilian states with occupational data to identify the skill intensity embedded in LTiVA based on the hypothetical extraction method (HEM) technique. Our findings show that the largest Southeastern economic area specializes in highly sophisticated functions, while the rest of the country embodies low skills in value-added trade for domestic and global trade levels. Furthermore, the results reveal a central role for the Sao Paulo state governing the subnational value chains and reinforcing the international uneven spatial functional division pattern at the subnational level.

Automated summary

The research found that the Southeastern economic area of Brazil specializes in highly sophisticated functions in value-added trade, while the rest of the country shows low skills in domestic and global trade. Sao Paulo state plays a central role in governing subnational value chains and reinforcing the international uneven spatial functional division pattern.