Labor market consequence of exports diversification and terms of trade shocks in EMDEs

Abstract

This research examines the labor market consequences of international trade for emerging markets and developing economies (EMDEs) while using the Bayesian panel multivariate regression approach for the period 2011–2023 for a panel of 18 countries. It employs labor market variables such as average monthly earnings, labor force participation rate, unemployment rate, and labor productivity, along with trade-related variables such as terms of trade index, export diversification, and trade volume. While GDP and population growth rates are employed as control variables. The estimates reveal that trade-related variables have a positive and statistically significant impact on labor earnings, labor productivity, and unemployment. Furthermore, estimates reveal a positive and statistically significant impact of GDP growth on domestic labor earnings and productivity whereas population growth negatively impacts both labor market outcomes. This research provides insights for policymakers to follow export-oriented policies to enhance the earnings and productivity of the domestic labor force in EMDEs.