Global labor requirements in the world economy: a GVC decomposition approach

What have been the different channels that contributed to the dynamics of global labor productivity in the ‘hyper-globalization’ (1995–2009) and ‘slowbalization’ (2009–2018) periods? To answer this question, this paper identifies four channels contributing to global saving of labor requirements by means of an input-output-based decomposition: within each global value chain (GVC), we distinguish whether a reduction in labor requirements is due to (i) direct labor saving trends or (ii) a geographical/sectoral reorganization of the GVC; (iii) across countries within a global sector, we identify the contribution of changes in countries’ final output market shares; and (iv) across global sectors, we identify the contribution of changes in the product composition of global final output. Our results suggest that technological change within GVCs was the main channel for global labor productivity growth, whereas the reallocation of final output between countries exerted a negative effect on productivity.