Measuring employment in global value chains based on an inter-country input-output model with multinational enterprises

Abstract

With rapid globalization, employment in global value chains (GVCs) has attracted increasing attention. Multinational enterprises (MNEs) are the major participants in GVC activities, whose employment creation through cross-border direct investment in GVCs has not been systematically characterized, leading to an underestimation of GVCs and their employment impacts. To fill this gap, this study measures the employment embodied in GVCs based on an inter-country input-output model with MNEs. The major findings are as follows: (1) the contribution of MNEs to GVC employment is significant (accounting for 7.4–8.0 %), especially in high-income economies (13.8 %) and high-tech manufacturing industries (22.6 %); (2) the major route by which foreign direct investment (FDI) drives employment is through D-F type production-sharing activities that satisfy local demand; and (3) the sectoral structure of FDI-related GVC employment not only varies between economies but also among the three types of production-sharing activities (D-F type, F-D type, and F-F type). These findings provide valuable insights for understanding how MNEs affect employment in GVCs and can help accurately assess the potential impacts of GVCs on the labor market.