# **1. Introduction**

Trade – and exports in particular – play a crucial role in supporting jobs and increasing labor earnings, consistent with the fact that 90% of jobs in the developing world are associated with private sector activities (World Bank, 2012). This role of exports is particularly important as jobs and labor earnings are key drivers of poverty reduction and increased shared prosperity in many developing countries (Azevedo et al., 2013). Indeed export growth played a significant role in the dramatic reduction in poverty rates in East Asian countries in recent decades.<sup>2</sup> Despite this, systematic data on the contribution of exports to employment and labor earnings across countries and sectors is not readily available, particularly for developing countries. How much labor income is supported by automotive exports in South Africa? How much of that is via linkages to sectors providing inputs for automotive? How many domestic jobs does $1 million of processed food exports support in Brazil? Is that higher than in comparator countries? Answers to such questions are typically not readily available. Yet this information matters. First, such information would provide some reference to the relative importance of exports for employment and wages in specific countries and sectors. Second, it would shed light on the extent to which the interconnections between sectors matter for jobs and wages supported by exports. However for the majority of governments in developing countries today, it is difficult to know how many jobs and what size of earnings their countries’ exports support domestically, let alone the contribution of individual export sectors.

This paper helps fill this gap by computing the domestic value of labor (i.e. total wages) and the number of jobs contained in exports for a large sample of developed and developing countries and sectors for intermittent years between 1995 and 2011.<sup>3</sup> The resulting Labor Content of Exports (LACEX) database, consisting of two data sets on the labor value added and the jobs content of exports, decomposes the contribution of jobs and wages to exports separately through their direct and indirect components (including both forward and backward linkages), and by skilled and unskilled labor. Doing so illustrates the broader, economy-wide relationship between trade and labor market outcomes. With the LACEX database in hand, the paper then presents stylized facts of how the labor and jobs content of exports have changed over time, and potential drivers of this change by comparing across sectors and countries based on income level and region.

The paper is related to some recent efforts to quantify the labor and jobs content of exports across countries. Timmer et al. (2013) provide an estimation of the number of jobs directly and indirectly related to manufacturing output (rather than exports) using the World Input-Output Database (WIOD). Their focus is almost exclusively on high income countries, and the EU27 countries in particular. Using similar methods and the same data, Jiang and Milberg (2013) estimate the (direct and indirect) labor content of exports for a panel of mainly high income countries at the aggregate level. Stone et al. (2011) compute the factor content of trade, including also skilled and unskilled labor for OECD countries as well as for some emerging countries. Their factor content does not distinguish between domestic and foreign.

Other studies investigate the impact of exports on the number of jobs within countries. The US Department of Commerce (2010) has begun to quantify the number of jobs that exports support in the American economy both directly and indirectly. Kucera et al. (2012) investigate the impact of the recent crisis through exports on employment in India and South Africa by computing the employment content of sectoral exports, including also employment via household expenditure due to export-related earnings.

> 2 For example, the boom in Vietnamese exports to the United States following the US–Vietnam Bilateral Trade Agreement of 2001 led to a large reduction in poverty (McCaig, 2011).

> 3 In the remainder of the paper we refer interchangeably to total wages, total labor value added, total compensation to employees, and total labor contained in exports.

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