Employment effects of joining global production networks: Does domestic value added matter?

Is the emphasis placed on domestic value added in trade and industry policy-making in developing countries consistent with the objective of employment generation through an export-oriented development strategy? This paper examines the rationale behind this policy emphasis by first revisiting the conventional case for using the value-added ratio as policy guidance and then undertaking an input-output analysis of the manufacturing industry in Thailand with emphasis on domestic employment generation. The analysis is based on a panel data set covering 74 manufacturing sectors from 1990 to 2015. The findings do not support the widely shared view that industries with a high value-added ratio have greater potential to create domestic export-induced employment. The policy implication of the results is that, in this era of economic globalization driven by global production networks, national industry policy needs to be guided by the market potential of products.