Shedding light on underexplored ways services trade impacts workers

Despite the rapid growth of cross-border trade in services, the evidence on how trade affects workers remains predominantly focused on manufacturing. This paper sheds new light on underexplored channels through which services trade reshapes labour markets, highlighting nuanced impacts not captured by aggregate employment effects. Expansions in services trade are found to be associated with shifts in demographic workforce composition. They are also linked to greater labour market dynamism, reflected in shorter job durations, but not to higher likelihood of switching between sectors or entering and exiting employment, nor of greater reliance on temporary contracts. At the regional level, services trade contributes to higher employment by drawing workers into the labour force and an increased probability of workers moving between regions. Moreover, jobs created by services trade are not limited to the tradable services sectors, as they generate positive spillovers to non-tradable services through sizeable local job multipliers. Collectively, the findings of this paper underscore the importance of services trade as a driver of local labour market dynamics and provide new evidence relevant for debates on gains from trade in an increasingly interconnected world.