Global value chains and labour markets - simultaneous analysis of wages and employment

This study examines the overall effect of global value chains (GVCs) on wages and labour demand. It exploits the World Input-Output Database to measure GVC involvement via recently developed participation indices (using both backward and forward linkages) and the relative GVC position using three-stage least squares regression. We find that the relative GVC position is negatively correlated with wages and employment and that the GVC participation effect depends on whether backward or forward linkages are considered. Moreover, we find heterogeneity across both countries (middle- vs high-income) and sectors (manufacturing versus services). Notably, the effect of GVC involvement on the labour market differs from that produced by traditional domestic trade.

Automated summary

The relative GVC position is negatively correlated with wages and employment, while the effect of GVC participation depends on whether backward or forward linkages are considered. There is also heterogeneity across middle- vs high-income countries and manufacturing versus services sectors in terms of GVC involvement.