various existing data, such as TiVA and Eora, from which the labor value added in exports can be extracted, and which can help increase the frequency of the data and improve their quality.

# _<u>Computing the labor value added content of exports</u>_

We work with multiple versions of the GTAP database, benchmarked to 1995, 1997, 2001, 2004, 2007 and 2011. To maintain backward compatibility, we start with the 1995 structure of sectors, and carry this forward in aggregation of more recent iterations of the database. To do so, we aggregate the 57 GTAP sectors into 24 sectors, which also allows ease of exposition of the results. (Table A2 in Appendix 1 provides the concordance between the 24 and 57 sectors.) We also generate the data with the 57 sectors from 1997 onwards. Our database excludes the regional aggregates in GTAP, resulting in 31 countries in 1995 expanding to 120 countries in 2011.

The IO tables in the GTAP data set allow one to exploit a form of social-accounting data – a variation on the social accounting matrix (SAM) where incomes are shown in the rows of the SAM while expenditures are shown in the columns (Hertel, 2013 and McDougall, 2001). The structure of the data provides a comprehensive and consistent record of national income accounting relationships between different sectors of an economy. It is based on a fundamental, general equilibrium principle of economics – every income (receipt) has a corresponding expenditure (outlay). The strength of this framework is that it provides a comprehensive record of the interrelationships of an economy, including intermediate and final demand linkages. For our purposes, it offers the advantage of linking consumption and external trade patterns explicitly to the inter-industry structure of intermediate demand. This allows for a fuller analysis than is possible when working strictly with IO tables.

We also make one adjustment to the data to ensure compatibility of the skilled-unskilled labor split over the years. All the versions of the GTAP data up to 2007 use only two types of labor – skilled and unskilled – while the latest version for 2011 (GTAP 9) classifies labor into five groups of occupational categories, such as officials and managers and service/shop workers (see Table A6 in Appendix 3). We checked that these categories cannot be reconciled with previous versions (see Figure A1 in Appendix 3), and instead exploit the fact that in previous versions of the data set the ratio of skilled-unskilled labor value added is constant over time for a specific country-sector pair.<sup>8</sup> Thus we apply the same skilled-unskilled labor value added ratio for each of these pairs to the 2011 data.

Since the GTAP database tracks interrelationships of an economy both for intermediate use and final demand (including exports), this complex structure of the database allows us to obtain the total value added content of final output and exports, including the compensation of employees’ component. This includes both the direct and indirect value added, based on the linkages of each sector with all other sectors in the economy. We can obtain both forward and backward linkages, where forward linkages count the value added of a given sector that goes into other sectors, while backward linkages count all the value added from other sectors that go into a given sector. Thus we can also account specifically for the direct value added attributable to labor, indirect value added (via backward or forward linkages), and total value added (the summation of direct and indirect value added via backward or forward linkages). We can further distinguish between the labor contributions from skilled and unskilled workers. Finally, we repeat the exercise for total final output as well as final output that is exported. This is explained in what follows more formally.

In order to obtain these labor value added measures, we first need to calculate intermediate multiplier matrixes that will be then used to multiply exports and final outputs. We begin by denoting a representation of intermediate and final demands as follows:

> 8 Results of this comparison are available upon request.

6