Focusing on the type of GVC participation across HMICs (regardless of their specialization in GVCs) suggests a stronger employment and income boost from forward GVC participation. Expanding imports of intermediates used for export production (i.e., backward GVC participation) is positively related to employment and income growth in a sector (Figure 5). A higher share of domestic value added used in third countries’ exports (i.e., forward GVC participation) has stronger benefits which seems surprising, given the low elasticities for commodity exporters that are characterized by high forward GVC participation (Figure 4). The lack of low-income countries in the country sample may explain the large positive elasticity of forward GVC participation, as intermediate exports used for further export production in other countries contain higher value-added inputs such as research or design services, as opposed to raw commodities. This confirms earlier results by Stolzenburg et al. (2019) suggesting a stronger correlation between forward GVC participation and value added within sectors in HMICs. The findings confirm the larger strength of the income channel relative to the employment channel.

**Figure 5: GVC participation-employment and GVC participation-income elasticities, by sectors, 1995-2018**

<!-- Start of picture text --> GVC participation-employment elasticities<br>1.0<br>0.5<br>0.0<br>-0.5<br>Total Agriculture, Mining Manufacturing Mfg - low tech Mfg - medium Mfg - high-med. Business Other services<br>fishing tech tech services<br>Backward GVC Forward GVC<br>GVC participation-income elasticities<br>1.00<br>0.50<br>0.00<br>-0.50<br>Total Agriculture, Mining Manufacturing Mfg - low tech Mfg - medium Mfg - high- Business Other services<br>fishing tech med. tech services<br>Backward GVC Forward GVC<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: GVC participation-employment (GVC participation-income, resp.) elasticities at the country-sector level have been estimated using an instrumental variables regression approach with employment (in natural logs) as dependent variable and the instrumented trade variables (in levels and natural logs) as independent variable. 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. For more information, see appendix 1.

A closer look at broad sectors suggests that the employment and income benefits from GVC participation are driven by manufacturing. Manufacturing job growth linked to export growth is higher when those exports are re-exported by a country’s trade partners (i.e., forward GVC participation) as opposed to job growth linked to growth of imported inputs in exports (i.e., backward GVC participation), as evidenced by the higher trade-employment elasticities for the former type of trade engagement (0.57 percent vs. 0.32 percent in Figure 5, top panel). The difference is most striking in the high-tech manufacturing sector which includes electronics, machinery, transport equipment and chemicals. In 9