Investigating the claim that labor markets have become more globally interconnected

Asian Development Bank (ADB) is investigating the claim that national labor markets have become more globally interconnected in recent decades in a new research paper called 'Is Employment Globalizing?'.

ADB does so by deriving estimates over time of three different notions of interconnection:

(i) the share of labor demand that is export induced (i.e., all labor demand created by foreign entities buying products exported by the home country)—we provide estimates for 40 countries

(ii) the share of workers employed in sectors producing tradable goods or services—68 countries

(iii) the ratio of the number of jobs that are either located in a tradable sector or that are involved in producing services that are required by these tradable sectors, to all jobs in the economy, which we call the trade-linked employment share—40 countries.

ADB comes to the conclusion that the evidence of a large increase in the interconnections between national labor market is far weaker than commonly asserted: levels of interconnectivity, and the direction of changes over time, vary across notions of interconnection and countries.

The main reasons for this are labor displacing productivity growth in tradable sectors of each economy and the diminishing fraction of national labor forces hired into manufacturing jobs worldwide.

ADB also discusses the implications of our results for different policy debates that each of the three measures is associated with: international coordination of macroeconomic policies (export-induced labor demand), currency devaluations(share of workers producing tradables), and education and labor protection (trade-linked share).

The full research paper is available on ADB's website.

(With inputs from ADB)