Export Illusion and Export-led Jobless Growth Relationship in Emerging Industrial Economies

Mehmet Demiral, Jeffrey B. Nugent

Abstract


The consensus that export contributes to employment by increasing economic growth has been recently weakened by new evidence from especially emerging industrial economies (EIEs). These countries have been recording significant achievements towards industrialization and export-led growth since the early 1990s but recently experiencing persistently high unemployment problem as well. In these export-led jobless growth cases, the export growth followed by overall economic growth does not seem to have created equivalent job opportunities. For this paradox, the interest in the extant literature seems to have ignored the vertically specialized global production networks (GPNs) in those international trade in intermediate goods has grown much faster than in final goods. Therefore, relevant trade statistics inflated by the multiple counting can cause export illusion proxied by high imports content of exports (ICE) and foreign value-added (FVA) for countries involved in the GPNs intensively like EIEs. 

This study aims to discover whether the export-led jobless growth phenomenon exists in case of 22 EIEs. The OECD’s input-output databases are utilized to gauge the extent of ICE and FVA. Data of unemployment and several control variables are those of the World Bank collection of world development indicators. Analysis results based on a panel dataset covering the post-1995 period reveal a mechanism that export growth brings export illusion which weakens the growth-employment nexus in general and even removes the linkage for some cases. The study concludes that trade not only means the exchange of goods and services but it also implies where the jobs are really created in today’s international trade pattern.

Keywords: Employment, Export illusion, Global production networks, Export-led jobless growth, Emerging Industrial economies.

JEL Codes:  C67, F66, O47


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