Key Sectors, Comparative Advantage, and
International Shifts in Employment: A Case
Study for Indonesia, South Korea, Mexico,
and Pakistan and Their Trade Relations with
the European Community
The expansion of trade between developing and industrial countries may lead to an international shift in employment. As developing countries concentrate on labor- intensive products in their export package relative to their imports, and would apply labor-intensive techniques in production relative to the techniques used in industrial countries, the resulting net shift in employment would be positive for the developing countries. This chapter describes such a shift in employment for a balanced increase in trade in manufactures between the EC and four developing countries: Indonesia, Korea (S), Mexico, and Pakistan.
The chapter also investigates the correlation between revealed performance in trade and factor contents of production for these four developing countries. Finally (but first in the chapter), the factor content of production is related to the selection of key sectors on the basis of linkage effects on employment, income, or output.
In 1958 Hirschman formulated the concepts of forward and backward linkages. Backward linkages relate to "input Provision" and forward linkages to "output utilization."
To measure backward linkages Hirschman ( 1958, p. 108) advocated going beyond first-round effects and including indirect effects computed using the Leontief inverse. In the notation recommended for this conference, and following Bulmer- Thomas ( 1982), the backward linkages (BL) (which are induced by increased final demand for products of sector j) are calculated as(1)