a 7.3 percent higher labor income, while the gain for final imports is 4.9 percent. Additional analysis by region and country is shown in Appendix Figures 9.1 to 9.3.

# 2.2 Which sectors are associated with the highest job and income increases?

Manufacturing sectors show the highest job and income growth associated with expanding exports in a sector, in particular those with high-medium technology intensity. Focusing on broad sectors reveals that export-employment elasticities are driven by manufacturing. A 10 percent growth in manufacturing exports is related to a 5.3 percent job growth (Figure 2). The potential for job creation through exports is particularly high in high-medium technology intensity manufacturing, including in motor vehicles, electrical equipment and computer and electronics (Figure 3, upper panel). This is despite the higher capital intensity of high-tech sectors, implying that capital and labor in these sectors are complementary.<sup>14</sup> Similarly, intermediate import growth in high-medium tech manufacturing sectors is related with high job growth which, to a large extent, is also used for export production (Figure 2).

**Figure 2: Trade-employment elasticities, by broad sector**

<!-- Start of picture text -->
1.2<br>1.0<br>0.8<br>0.6<br>0.4<br>0.2<br>0.0<br>-0.2<br>-0.4<br>Agriculture, Mining Manufacturing Mfg - low tech Mfg - medium Mfg - high- Business Other services<br>fishing tech med. tech services<br>Exports Intermediate imports Final imports<br><!-- End of picture text -->

Source: Own computations. Data: OECD TiE and TiVA data, covering 48 countries (see Appendix 2) and 45 sectors for the period 1995-2018. Note: Trade-employment (trade-income, resp.) elasticities at the country-sector level have been estimated using employment (in natural logs) as dependent variable and the instrumented trade variables (in levels and natural logs) as independent variable. For more information on the instruments, see Appendix 1. The panel data regressions control for country-sector, country-time, and sector-time fixed effects. Only results significant at the 10% level and above the critical value for the Kleibergen-Paap test statistic are reported.

While some low- and medium-tech manufacturing sectors create many jobs when exports rise, capitalintensive sectors show workforce contractions. Some low- and medium-tech manufacturing sectors, in particular exports of paper products as well as rubber and plastics, create many jobs. Surprisingly, we do not find a positive link with employment in the textiles and apparel sector, but only with labor incomes (Figure 3). Possible explanations include the strong reduction of apparel jobs in China, India and other emerging countries (as discussed further in section 3). Other sectors have negative export-employment elasticities, most notably machinery, food and beverages, fishing and aquaculture and mining which tend to be capital-intensive, explaining the decline in the number of jobs. This finding could also be partially explained by the country sample excluding low-income countries for which exports in sectors like fishing or small-scale and artisanal mining create job opportunities.<sup>15</sup>

> 14 Evidence for Greece during the second half of the 1990s found that high technology and capital-intensive manufacturing sectors contributed most strongly to net employment growth (Voulgaris, Papadogonas, Agiomirgianakis 2005).

> 15 - - Globally, around 40 million people are estimated to work in small-scale mining (https://www.reuters.com/article/us <u>mining asm/more-than-40-million-people-work-in-artisanal-mining-report-idUSKCN1S025C), while almost 60 million people work in</u> fisheries and aquaculture (https://www.fao.org/3/cc0461en/online/sofia/2022/fisheries-aquaculture-employment.html).

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