Yet across the region, the ratio of trade to GDP, an indicator of trade openness, remains low.
In other words,
This low exposure to international trade also affects South Asian labor markets which are marked by low-quality jobs—informal jobs are widespread—sizeable wage gaps between demographic groups, and pressure from high population growth.
But how much of a boost can South Asia expect by beefing up its exports?
More international trade could boost economic growth, create jobs, and improve labor market outcomes.
In recent years, several studies have shown how more imports can affect local labor market outcomes, but few have looked at exports.
To fill that gap, our joint report with the International Labour Organization uses cutting-edge econometric techniques and historical data to estimate how greater global demand for South Asian exports would affect wages, employment, and informality rates for workers.
Here are four interesting facts about how exports impact South Asia’s labor markets:
First, higher exports go hand in hand with higher wages.
We find that
I, representing 0.8 percent of the country’s labor force.
Contrary to many studies on import competition in advanced economies, we do not find any impact of an export shock on the number of jobs in South Asia.
The reason is that
In developing and emerging economies, the majority of workers cannot afford to be unemployed as social safety nets may not be an option
Therefore, higher exports are reflected in higher incomes or lower informality rates, and not employment figures.
Thus, governments have a role to play and need to develop policies to better share the gains from trade.
, and to better connect the export hubs with the rest of the country.
Other steps would involve raising skills and helping groups such as women and youth, who face disadvantages, enter the labor force which is discussed in a forthcoming blog.