Empirical links between global value chains, trade and unemployment

Abstract

This study purposes to explore the determinants of unemployment in 35 countries distinguished between 18 developed and 17 developing countries over 12 years covering 2005-2016. Unlike the majority of the relevant literature, the study integrates different aspects of internal and external predictors of unemployment focusing on global value chains (GVCs) involvement. The study employs a panel regression analysis to estimate the relationships of unemployment with economic growth, government expenditure, inflation, human capital, population, industrialization, trade openness, and foreign direct investment flows. To what extent countries involve in GVCs are measured by the foreign value-added share of gross exports and domestic value-added share of gross imports. Empirical results show that it is yet hard to come to a global consensus about a common set of determinants of unemployment in a cross-country aspect. Moreover, the influences of internal and external factors tend to vary substantially across the development phases and structural changes of countries. Overall findings keep the debate about jobless export, the job-carrying function of foreign direct investment, employment gain from trade and trade in employment at the center of the unemployment agenda of both developed and developing countries. The study concludes with some discussions and implications of the evidence.