Understanding export-generated employment in India

Abstract

International trade can play a catalytic role in economic development and employment enhancement. To understand the employment impact of India’s pattern of trade, we use a structural decomposition analysis utilising the World Input – Output Database. Distinguishing between final and intermediate exports from India, we quantify the domestic employment effect during 2000–14. We show that a shift in final exports’ composition towards sectors and sub-sectors with lower employment generation potential led to a negative employment effect. However, changes in international production sharing have largely had a positive impact on employment in India. Our structural decomposition analysis is complemented with a panel regression that tracks the employment effect of exports through backward linkages. We find significant differential impacts in India’s bilateral trade with middle-income versus high-income countries. While bilateral backward linkages from exports to middle-income countries enhanced employment in India, exports to high-income countries did not yield a positive employment effect.