Do trade and technology foster employment growth? Evidence from Indian industries

Abstract

AbstractSeveral developing economies have been generating fast growth, but formal employment generation remains a concern, causing a significant workforce to continue working in the informal sector. In this context, this study investigates the employment effects of international trade and in‐house R&D in the Indian case. Our attempt is important because India is not only the largest country in terms of population but also the largest working population in the world. We coalesce industry‐level data from two different sources for the period 1991–2018 and employ a powerful system GMM estimator in the analysis. Our findings are interesting and vital. We show that although the role of trade is overall positive, export and import have contrasting roles individually in generating employment. Most generally, exporting is a generator of employment, while importing causes a loss in it. Our analysis implies that the interplay of trade, and individually that of exports and imports, with in‐house R&D depends on many factors and may be more intricate than previously assumed.