Employment impacts of the US global value chain participation

ABSTRACT

This study applies a new set of comprehensive GVC indices to measure the US GVC participation and examine its impact on US employment from both backward and forward GVC linkage perspectives. Based on data from the World Input-Output Database that covers 1995–2011 across all 35 industries in the US and their value-added trade with 40 other economies, and using Arellano and Bond’s GMM estimator for our dynamic panel data (DPD) model specifications, we find that GVC activities have significant positive impacts on the overall US employment. In our main model specification, each time the GVC participation increases by one point, the overall US employment increases by 0.60 percentage point; however, the benefits are only coming from the backward GVC linkages in their simple form and focused on the medium-skilled labor force. Finally, the general forward GVCs do have a minor significant negative impact on the low-skilled labor segment.

KEYWORDS:

• GVCs
• employment
• backward GVC linkage
• forward GVC linkage

JEL CLASSIFICATION:

• F1
• F6

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

Raw data were generated at World Input-Output Database along with its Socio-economic Accounts (SEAs) (link: www.wiod.org), and the UIBE GVC Index System (link: http://rigvc.uibe.edu.cn/english/D_E/database_database/index.htm). Derived data supporting the findings of this study are available from the corresponding author Z. Pan on request.

Notes

1. For a comprehensive literature survey on offshoring and labor market impacts, refer to Hummels, Munch, and Xiang (2018).

2. Criscuolo and Timmis (2017) provide an extensive literature review on the relationship between GVCs and productivity.

3. Amiti and Wei (2005a) interpret offshoring intensity as an inverse proxy of the price of imported service inputs.

4. This could be one of the reasons why, in a competitive product market, even unions could encourage the introduction of new technologies into the workplace (Tauman and Weiss 1987; Dowrick and Spencer 1994).

5. The technical details of the WIOT data are discussed in Dietzenbacher et al. (2013). Timmer et al. (2015) Section 2 provides a comparison of the WIOT database with GTAP and the OECD Trade-in-value-added (TiVA) database.

6. See, e.g., Greenaway, Hine, and Wright (1999) under the assumption of perfect capital market; Amiti and Wei (2005b).

7. The three types of labor skills in the SEAs are defined on the basis of the 1997 International Standard Classification of Education (ISCED), where low-skilled corresponds to an education attainment of primary and lower secondary education and high-skilled to the level of tertiary education [see (Erumban et al. 2012)].

8. ‘In general, we check for serial correlation of order L in levels by looking for a correlation of order L + 1 in differences.’ (Roodman 2006).

Additional information

Funding

This work was supported by the CSU-AAUP Faculty Research Grant under Grant 2018-19.