Global Value Chains, Job Creation, and Job Destruction among Firms in South Africa

Gideon Ndubuisi and Solomon Owusu

2023

#Trade and FDI

#Social and working conditions

Additional info: Part of STEG Working Papers series

Extant studies suggest that firms’ engagement in global value chain (GVC) trade is associated with productivity gains that result from the continual reallocation of resources to their most productive use. This reallocation generates benefits for transitioning workers but also incurs costs for workers undergoing turnover. A comprehensive understanding of the overall welfare effect of firms’ engage- ment in GVC trade requires a consideration of the productivity gains and the net job reallocation gains and losses. This paper provides the first empirical evidence in this regard using firm-level data that covers the universe of formal firms in South Africa. We document that firms’ integration into GVC is associated with significantly positive job reallocation that creates a net job gain at the firm level. However, this is largely driven by firm entry into GVC as continuous GVC firms have an overall net job loss. Additional analysis provides suggestive evidence of a role of firm characteristics including firm age and size in affecting these outcomes.