Does Lockdown Reduce Employment in Major Developing Countries? An Assessment Based on Multiregional Input–Output Model and Scenario Analysis

Abstract

With the development of global value chains, more and more countries are involved in global trade, which has brought an extensive social impact. Past studies on the employment impact of trade have pointed out that free trade has significantly boosted employment in developing economies, with large populations working in export-related jobs along the value chains. Recently, the COVID-19 pandemic has caused global trade protectionism to become more rampant. This study aims to establish a trade employment effect accounting model, based on the comparison of multiple scenarios, to discuss the employment impact of trade lockdown on major developing and developed countries. Specifically, based on a multi-regional input–output model, we map the flow network of trade-induced employment in 15 major global economies, and the scenarios of free trade and restricted trade are simulated to determine the employment impact of protectionism across multiple trade patterns. The results show that the current labor flow induced by global trade mainly flows from developing countries such as China and India to developed countries such as the EU and the United States. In the total employment induced by trade, the proportion of final products trade reached 42.82%. Trade protection would cut 19.86 million jobs worldwide. Under the trade restriction scenario, employment in developing countries would be reduced, with China and India losing 45.24 million and 10.10 million jobs, respectively. People working in the final product processing trade face the greatest risk of unemployment, especially in manufacturing and services. Among developed countries, the EU and the US would add 5.52 and 2.23 million jobs due to industrial repatriation.