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Policy Research Working Paper 10433

Public Disclosure Authorized

The Role of Global Value Chains for Worker

Tasks and Wage Inequality
Piotr Lewandowski
Karol Madoń
Deborah Winkler
Public Disclosure Authorized
Public Disclosure Authorized

Macroeconomics, Trade and Investment Global Practice

May 2023
Policy Research Working Paper 10433

Abstract
This paper studies the relationship between participation in routine task intensity in non-offshorable occupations in
global value chains, worker routine task intensity, and with- business services. Higher worker-level routine task inten-
in-country wage inequality. It uses unique survey data from sity is strongly associated with lower wages, so global value
47 countries across the development spectrum to calculate chains participation indirectly widens the within-country
worker-level, country-specific routine task intensity and wage inequality through this routine task intensity chan-
combines them with sectoral measures of backward and for- nel. At the same time, global value chains participation
ward global value chains participation. Higher global value directly contributes to reduced wage inequality, except for
chains participation is associated with more routine-in- the richest countries. Overall, this analysis finds that global
tensive work, specifically among offshorable occupations, value chains participation reduces wage inequality in most
especially in countries at lower development levels. The low- and middle-income countries that receive offshored
results by broad sectors contrast sharply: higher global value jobs but widens wage inequality in high-income countries
chains participation is linked to a higher routine task inten- that offshore jobs.
sity in offshorable occupations in the industry but a lower

This paper is a product of the Macroeconomics, Trade and Investment Global Practice. It is part of a larger effort by the
World Bank to provide open access to its research and make a contribution to development policy discussions around the
world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The authors may be
contacted at piotr.lewandowski@ibs.org.pl (corresponding author), karol.madon@ibs.org.pl and dwinkler2@worldbank.org.

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development
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The Role of Global Value Chains for Worker Tasks and
Wage Inequality•
Piotr Lewandowski♦
Karol Madoń♣
Deborah Winkler ♥

Keywords: routine task intensity, global value chains, globalization, cross-country division of work,
wage inequality
JEL: J21, J24, J31, F66

•
We thank Sébastien Dessus, Maryla Maliszewska, Marta Palczyńska, Bob Rijkers, Ben Shepherd, Jorge Tudela-Pye and
the participants of the World Bank authors’ workshops “Leveraging trade for more and better job opportunities in
developing countries” for their useful comments. The work was carried out under the overall supervision of Sébastien
Dessus and Antonio Nucifora. This paper was financially supported by the World Bank. The findings, interpretations, and
conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the
World Bank Group and its affiliated organisations, its Executive Directors or the governments they represent. Karol Madoń’s
contribution was financed by the National Science Centre, project no. 2021/41/N/HS4/03640, agreement no. UMO-
2021/41/N/HS4/03640. All errors are ours.

Institute for Structural Research (IBS), IZA, and RWI. Warsaw, Poland. e-mail: piotr.lewandowski@ibs.org.pl,
corresponding author.

Institute for Structural Research (IBS), and SGH Warsaw School of Economics. Warsaw, Poland. E-mail:
karol.madon@ibs.org.pl

Global Trade and Regional Integration Unit, World Bank Group, Washington, D.C. USA. E-mail: dwinkler2@worldbank.org

i
1. Introduction
Traditional trade theory predicted that countries’ specialization in trade affects the international division of
labor. Wealthier countries which tend to be relatively more endowed with skilled labor and technology have had
a comparative advantage in the exports of skill- and technology-intensive goods and services. In contrast,
developing nations have been relatively more abundant in low-wage labor and natural resources, thus
specializing in labor- and resource-intensive goods exports. Both types of countries exported the goods and
services that use their relatively abundant factors more intensively. Recently, however, countries specialize in
the exports of tasks they have a comparative advantage in (Grossman & Rossi-Hansberg, 2008) rather than
final goods and services. Technological change and trade liberalization have fostered the possibility of trading
tasks, offering opportunities to developing countries to participate and upgrade in global value chains (GVCs)
(Taglioni & Winkler, 2016). The “second unbundling” of corporate tasks has intensified this division of labor
(Baldwin, 2014), as routine tasks are easier to offshore (Blinder & Krueger, 2013), especially in manufacturing
(Rodrik, 2013). The decline in routine jobs in the United States, European Union, and some emerging countries
since the late 1980s contributed to the polarization of job opportunities within countries (Autor & Dorn, 2013;
Cortes et al., 2017; Goos et al., 2014; Jensen & Kletzer, 2010; Michaels et al., 2014; Reijnders & de Vries, 2018;
Spitz‐Oener, 2006).
A GVC consists of a series of value-adding tasks, from inception to selling a product or service for final
consumption (World Bank, 2020). Richer countries perform more non-routine tasks that require creativity, data
analytics, or guiding people. In contrast, poorer countries specialize in routine-intensive tasks that are often
repetitive, well-structured, and require being exact and accurate rather than creative (Figure 1). What is the role
of GVCs in explaining the division of worker tasks across countries? What is the GVCs’ contribution to within-
country differences in job tasks, and as higher routine task intensity is strongly associated with lower earnings
(Autor & Handel, 2013; de la Rica et al., 2020), to wage inequality? Do various forms of GVC participation differ
in this regard?
Figure 1. The average routine task intensity (RTI), by countries’ development level (GDP per capita), accounts for cross-
country occupational task differences.

Note: for each task content, the 0 is set at the United States average value, and 1 corresponds to one standard deviation of RTI in the
United States. GDP per capita in PPP, current international $, country averages for 2011–2016.
Source: Lewandowski et al. (2022).

1
Drawing on a unique survey dataset, this study examines the existence and nature of linkages between GVC
participation and the routine task intensity (RTI) of workers across 47 countries at all developmental stages.
Specifically, this paper systematically assesses how the nature of GVCs mediates this relationship, accounting
for differences across sectors and types of occupations, particularly offshorable and non-offshorable
occupations. Moreover, we evaluate how GVCs contribute to the task structures in the domestic labor markets,
and to within-country wage inequality, as measured by the Gini coefficient. We distinguish between the direct
– through wages – and indirect – through RTI – contribution of GVC participation to wage inequality.
The relationship between GVC participation and RTI is depends on a country’s factor endowments which
determine its type of task specialization in GVCs. In developing countries such as Indonesia, a higher backward
GVC participation, i.e., the share of imported inputs used in export production, may be associated with a higher
worker-level RTI. Such countries tend to have abundant low-wage labor and specialize in the production tasks
of basic manufacturing GVCs, typically the final assembly stage. Thus, they rely strongly on imported inputs
which they process for their semi-final or final exports. However, high backward GVC integration also
characterizes countries specializing in more advanced manufacturing and services GVCs. Such countries are
endowed with skilled labor and perform some routine tasks (e.g. customer service or accounting) and some
non-routine tasks (e.g., IT support) (World Bank, 2020). Examples include Central Eastern European countries
(Czechia, Hungary, Poland).1
The type of GVC participation in East Asian and Central Eastern European countries contrasts sharply with that
of many Sub-Saharan African or Latin American countries specializing in commodities – agriculture and mining
(Hanson, 2017). These countries show low backward GVC participation as they predominantly export upstream
GVC tasks with low reliance on imported inputs and fewer opportunities to innovate and upgrade (Fernandez-
Stark et al., 2011; Taglioni & Winkler, 2016; World Bank, 2020). They typically exhibit high forward GVC
participation, namely a high share of domestic value added embodied in their direct partner countries’ exports
(Borin & Mancini, 2015, 2019). As a result, higher forward GVC participation in commodity-exporting countries
may be associated with a higher RTI, as upstream tasks in agricultural or small-scale mining GVCs are more
likely to be routine-intensive.2 High forward GVC participation is also a feature of countries specialized in
innovative GVC tasks (World Bank, 2020), but its expected relationship with RTI contrasts that of commodity
exporters. In innovative countries, high value-added upstream tasks, such as research and design services,
make up a larger portion of their domestic value added that is re-exported by their bilateral trading partners.
These tasks tend to be non-routine. These country examples illustrate that the relationship between GVC
participation and RTI may vary across sectors and countries with different development levels and models. It
may also differ between backward and forward GVC participation.
We make three key contributions. First, this study quantifies the relationship between GVC participation and
worker task demand, which remains under-researched (Marcolin et al., 2016). Our PIAAC, STEP, and CULS
survey data cover 47 countries at different development levels and types of integration into GVCs. We measure
RTI at a worker level, applying the method proposed by Lewandowski et al. (2022). In the absence of direct

1
For instance, some East Asian countries that initially specialized in blue-collar jobs managed to increase their workforce's
skill supply, upgraded in GVCs, and shifted towards more upstream and downstream activities (de Vries et al., 2019).
Similarly, some Central Eastern European countries (Czechia, Hungary, Poland, Slovenia) have been upgrading from an
assembly-line specialization towards more advanced activities (Kordalska & Olczyk, 2022; Timmer et al., 2019).
2
In agribusiness, for instance, routine tasks include seed sowing and harvesting. More downstream tasks, such as
washing, chopping, packing, and applying bar codes on fruits and vegetables, are also routine. Assigning one specialized
task to each worker, rather than having one worker perform a series of consecutive tasks, increases the RTI.

2
export measures at the task level,3 we link sectoral measures of GVC participation to RTI at the worker level in
a given sector, drawing on the methodology of Borin & Mancini (2019) based on EORA data. We also control for
technology use with a country-sector share of workers who use computers at work. The country-sector level
globalization and technology measures are plausibly exogenous to the decisions of individual firms and
workers. The closest study to ours is Lewandowski et al. (2022), but we use much more disaggregated
measures of GVC participation (especially in manufacturing) and assess the relative role of forward and
backward linkages. Reijnders and de Vries (2018) also provided evidence on the role of offshoring and
technological change in GVCs in explaining the increase in non-routine occupational labor demand in a sample
of 37 advanced and emerging countries.4 However, they assumed that occupations are identical globally and
measured occupational task contents with American data (the Occupation Information Network – O*NET). We
use worker-level RTI to account for cross-country task differences in comparable occupations. This is vital as
theory suggests that offshoring leads to a global polarization of tasks within occupations (Grossman & Rossi-
Hansberg, 2008) and occupational task demands indeed differ between countries (Caunedo et al., 2021; de la
Rica et al., 2020; Lewandowski et al., 2022; Lo Bello et al., 2019).5
We find significant linkages between GVC participation and RTI. Importantly, these associations differ between
backward and forward integration. Overall, backward GVC participation is not correlated with RTI, while higher
forward GVC participation is associated with more routine-intensive work. Moreover, the strength of this
relationship is negatively related to countries’ development – it is stronger in countries with relatively low GDP
per capita and weaker in countries with high GDP per capita.
Second, this study assesses how the nature of occupations and sectors mediates the relationship between GVC
participation and worker-level RTI. Specifically, it investigates the role of occupations’ offshorability (Blinder &
Krueger, 2013). The relationship between GVC participation and RTI may be particularly pronounced among
workers performing offshorable tasks in low-skilled occupations. Workers in less developed countries have a
comparative advantage in performing routine tasks due to their larger endowment with low-skill workers
(Grossman & Rossi-Hansberg, 2008). Indeed, Lewandowski et al. (2022) found that the relationship between
backward GVC participation and worker-level RTI is the strongest among workers in low-skilled occupations.
We find a strong and significant relationship between GVC participation – both backward and forward – and
RTI among workers in offshorable occupations, especially in less-developed countries. However, we find no
such relationship among workers in non-offshorable occupations. In addition, acknowledging that sectoral
specialization of countries matters for the global division of tasks (Hanson, 2017), this paper examines
heterogeneity between sectors. Importantly, we find a contrasting relationship between GVC participation and
RTI in the industrial and business services sectors. In industrial sectors, a higher GVC participation is associated
with more routine-intensive work in offshorable occupations, confirming that a country’s GVC participation is
driven by the manufacturing sector (Fernandes et al., 2022). In sharp contrast, a higher GVC participation in
business services sectors is correlated with less routine-intensive work in non-offshorable occupations.

3
To understand how GVCs shape the division of tasks across countries, research would ideally relate measures of task
exports to data on tasks’ routine intensity. GVC participation measures to date are only available at the sector or firm level
for a given country. However, recent work has introduced new measures of income and job activities in exports where
activity is defined as a sector-occupation pair (Kruse et al., 2023).
4
Reijnders and de Vries (2018) combine input-output data to decompose changes in occupational labor demand along the
value chain, but their methodology does not allow differentiation between intensities of GVC participation.
5
Other strands of literature relating globalization to the demand for workers in routine jobs study the effects of global
trade (Autor et al., 2015), the China trade shock on local labor markets (Aghelmaleki et al., 2022; Autor et al., 2013, 2016),
as well as offshoring (Autor et al., 2016; Baumgarten et al., 2013; Ebenstein et al., 2014; Goos et al., 2014; Hanson, 2017).

3
Third, this study assesses the relationship between GVC participation and wage inequality (the Gini coefficient
of hourly wages) within countries. Globalization may widen differences in RTI between workers in offshorable
occupations and those in non-offshorable occupations and thus contribute to earnings inequality, as workers
performing less routine-intensive tasks tend to earn more (Autor & Handel, 2013; de la Rica et al., 2020). Our
study confirms that a higher RTI is associated with lower wages. Consequently, GVC participation can influence
wage inequality through two channels: (i) indirectly through its relationship with RTI, (ii) and directly through
diverse wage effects among different types of workers, especially in offshorable and non-offshorable
occupations.
Extensive literature studied the effects of offshoring on the relative demand for different occupations at the
sectoral level, usually finding demand shifts with implications of inequality. It primarily differentiated between
production and non-production workers and capturing relative demand for particular worker types with their
share in the sector’s wage bill. It initially focused on goods offshoring in manufacturing – see the seminal
studies on the United States by Feenstra and Hanson (1999, 1996), and the broader literature review in Crinò
(2009) – generally finding an increase in the relative demand for non-production workers. Focusing on services
offshoring, some studies found it increased the relative demand for skills in the United States and Western
Europe (Crinò, 2010, 2012), or lowered the relative demand for non-production workers in German
manufacturing (Winkler, 2013). Several studies focused on worker-level adjustments to trade and offshoring
found a downward pressure on wages in low-skilled occupations and upward pressure on wages in high-skilled
occupations in the United Kingdom and Germany (Geishecker & Görg, 2013; Koerner, 2022). Ebenstein et al.
(2014) found that offshoring negatively affects individuals’ wages in the United States due to relocating workers
from higher-wage manufacturing jobs to other sectors and occupations. Existing cross-country studies
(Wolszczak-Derlacz & Parteka, 2018) find small negative effects of offshoring on the wages of low- and middle-
skilled workers, but focus on high-income countries. In the meta-analysis of within-country studies, Cardoso et
al. (2021) showed that offshoring benefits high-skilled workers and harms low-skilled workers, especially in the
origin countries. However, Gonzalez et al. (2015) found that GVC participation has a relatively small impact on
wage distributions and can reduce wage inequality among low-skilled segments of the labor force. Duarte et al.
(2022) found that countries with medium levels of GVC participation tend to record higher income inequality
than those with low or high levels of GVC participation.
Our study’s novelty is quantifying labor market channels of globalization’s contribution to within-country wage
inequality, in a cross-country setting that covers both developed and developing countries and accounts for
occupations’ offshorability. The direct contribution – GVCs’ wage effects on different types of workers –
reduces wage inequality within countries, while the indirect contribution – through linkages with RTI – increases
it. The relative strengths of these contributions differ between countries at different development levels. We
show that in countries that primarily receive offshored jobs, GVC participation reduces wage inequality despite
widening the gap in RTI between offshorable and non-offshorable occupations. However, in rich countries that
mostly offshore jobs, it widens wage inequality as GVC participation benefits mainly workers in non-offshorable
occupations in services.
This paper is structured as follows. Section 2 introduces the data, measurements, and descriptive analysis.
Section 3 presents the model and regression results linking GVC participation to worker-level RTI, while section
4 focuses on the relationship between GVC participation and wage inequality. Section 5 concludes and outlines
policy implications.

4
2. Data and descriptive evidence
a. Data and measurement
Our worker-level dataset covers 47 countries at different development levels (Table A4 in the Appendix). Most
of the country coverage comes from the OECD’s Programme for the International Assessment of Adult
Competencies – PIAAC (2019). During three rounds of the study (2011-2012, 2014-2015, and 2017-2018), data
were collected in 37 countries. The sample sizes amount to a few thousand 16-65 years old individuals. We
complement PIAAC with the Skills Towards Employment and Productivity – STEP (World Bank, 2017) survey
data from nine low- and middle-income countries. The STEP data were collected in 2012-2014 among urban
residents aged 15-64 and covered a few thousand respondents in each country. We also use the “skill use at
work” module of the third wave of the China Urban Labour Survey (CULS, 2017), which directly implemented the
STEP questionnaire and ensured comparability with other countries in our sample. The survey collected data
from six large cities in China (Guangzhou, Shanghai, Fuzhou, Shenyang, Xian, and Wuhan) and covered about
15,000 individuals.
Following Lewandowski et al. (2022), we create a worker-level task content measure of occupations across
countries in the spirit of Acemoglu and Autor (2011). As the STEP surveys are urban surveys, for comparability
we omit farmers and skilled agricultural workers (ISCO 6 from the sample in all countries. For methodological
details, see Lewandowski et al. (2022). We calculate the worker-level routine task intensity according to the
following formula:
(𝑛𝑟𝑎𝑛𝑎𝑙𝑦𝑡𝑖𝑐𝑎𝑙 + 𝑛𝑟𝑝𝑒𝑟𝑠𝑜𝑛𝑎𝑙 ) (1)
𝑅𝑇𝐼 = ln(𝑟𝑐𝑜𝑔 ) −
2
where, 𝑟𝑐𝑜𝑔 , 𝑛𝑟𝑎𝑛𝑎𝑙𝑦𝑡𝑖𝑐𝑎𝑙 , 𝑛𝑟𝑝𝑒𝑟𝑠𝑜𝑛𝑎𝑙 are routine cognitive, non-routine cognitive analytical, and non-routine
cognitive personal task levels. Table A1 in Appendix A enlists survey items used to construct these task
measures. Particular task measures and RTI are standardized using their mean and standard deviation in the
United States.
We use hourly wages in US dollars, adjusted for purchasing power parity, with a 99% winsorization. Wage data
are available for 38 of the 47 countries in our sample (Table A4), we adjust the sample accordingly in the wage
analysis.6
The country-sector level measures of GVC participation are based on the EORA database (Lenzen et al., 2012,
2013) and computed following the methodology of Borin & Mancini (2015, 2019). In particular, we use both
backward and forward GVC participation measures. Both quantify value-added flows that cross at least two
country borders. Backward GVC participation measures the share of imported inputs used in export production
(% of total exports). Forward GVC participation captures the share of domestic value added embodied in a
country’s bilateral partners’ exports (% of total exports).7
Finally, we follow Blinder & Krueger, 2013), dividing occupations into offshorable and non-offshorable. We
assign occupations to groups starting at the 4-digit ISCO-08 level, depending on data availability. Most of the
countries report occupations using 3- and 4-digit ISCO-08 codes. For clarity, Table A3 in Appendix A lists
occupations with assigned offshorability groups (at the 2-digit ISCO level).

6
We use the full sample of 47 countries in the first part of the analysis to maximize variation across countries.
7
This measure avoids a double-counting problem prevalent in alternative measures of forward GVC participation.

5
 b. Descriptive analysis
In the first step, we visually explore the relationship between GVC participation and RTI at the country-sector
level. There is no correlation between backward GVC participation (9%, insignificant, left panel of Figure 2) and
the average RTI. Similarly, the scatterplot suggests only a moderate correlation with forward GVC participation
which is negative (-17%, right panel of Figure 2). The definition of GVC participation does not specify the type
of value-added crossing borders – ranging from low (e.g., raw materials) to high high-value-added tasks (World
Bank, 2020). These weak relationships could thus mask heterogeneity across types of countries, sectors and
occupations.
Figure 2. The correlation between backward and forward GVC participation and the average routine task
intensity (RTI), by country and sector.
Backward GVC participation Forward GVC participation

Note: for each task content, the 0 is set at the United States average value and 1 corresponds to one standard deviation of this
particular task content value in the United States. GDP per capita in PPP, current international $, country averages for 2011–2016.
Source: Authors’ calculations based PIAAC, STEP, CULS (tasks), World Bank (GDP), and EORA (GVC) data.

In the second step, we relate GVC participation to average wages at the country-sector level, differentiating
between the industrial and business services sectors. Overall, backward and forward GVCs participation
measures positively correlate with average hourly wages at the country-sector level (Figure 3), suggesting
positive productivity spillovers from firms participating in GVCs for workers. In the case of backward GVC
participation, the correlation with wages in the industrial sector (37%) is stronger relative to the business
services sector8 (23%, Figure 3, left panel). It is in line with the intuition that high backward GVC participation in
the industrial sector (driven mainly by manufacturing sectors) is associated with assembly tasks of specialized
sectors where hourly wages can be expected to be higher (think of, e.g., technicians in the automotive sector).
There is, however, high dispersion, because high backward GVC participation can characterize low-wage
countries specialized in limited manufacturing GVCs, but also richer countries specialized in more sophisticated
GVCs
In the case of forward GVC participation, the opposite finding holds. The correlation with average hourly wages
in the business services sector (36%) is higher than in the industrial sector (18%, Figure 3, right panel). High
forward GVC participation in business services is associated with high-value-added tasks such as product
design or R&D, which earn higher hourly wages. The high dispersion again suggests that high forward GVC
participation is associated with lower-wage commodity exporters and innovative countries.

8
Retail and wholesale trade, accommodation, food service, transportation, storage, information and communication,
financial, real estate, professional and administrative service activities (G-N ISIC rev. 4 sections).

6
 Figure 3. The correlation between backward and forward GVC participation and hourly wages, by country and
broad sector.
Backward GVC participation Forward GVC participation

Note: Hourly wages are in PPP US $, top 1% of earners are excluded. Average wages are weighted with sectors’ output.
Source: Authors’ calculations based PIAAC, STEP and EORA (GVC) data.

3. Global value chain participation and routine task intensity

a. Econometric model
The econometric model quantifies the relationship between GVC participation and the average RTI of workers
and exploits variation between countries within sectors (especially within manufacturing). It broadly follows the
specification of Lewandowski et al. (2022). In particular, we estimate pooled OLS regressions of the following
form:

𝑅𝑇𝐼𝑖𝑗𝑠𝑐 = 𝛽0 + 𝛽1 𝐺𝑠𝑐 + 𝛽2 𝑍𝑠𝑐 + 𝛽3 𝑋𝑖𝑗𝑠𝑐 + 𝜆𝑠 + 𝜖𝑖𝑗𝑠𝑐 (2)

where 𝑅𝑇𝐼𝑖𝑗𝑠𝑐 is the RTI of individual 𝑖 in occupation 𝑗 in sector 𝑠 in country 𝑐; 𝐺𝑠𝑐 measures GVC participation
in sector 𝑠 in country 𝑐; 𝑍𝑠𝑐 captures technology in sector 𝑠 in country 𝑐; 𝑋𝑖𝑗𝑠𝑐 are individual skills of worker 𝑖
in occupation 𝑗 in sector 𝑠 in country 𝑐; and 𝜆𝑠 are sector fixed effects.

We use measures of backward and forward GVC participation in sector 𝑠 and country 𝑐. The measures are
standardized within the sample to allow for interpretation regarding their relative economic magnitudes.
Importantly, these measures vary between narrowly defined sub-sectors within manufacturing. Additionally, we
control for foreign direct investment (FDI) as a share of GDP to capture globalization more broadly.
To capture technology, we use the share of workers in sector 𝑠 and country 𝑐 who use computers at work.
These measures are based on the PIAAC and STEP survey questions about a worker’s personal computer use.
We aggregate this worker-level information to the sector level to address potential endogeneity concerns, as
the performance of particular tasks may require computers. We include a quadratic term, allowing for possible
non-linear linkages between computer use and the RTI. We also include sector-level fixed effects (18 sectors
of 1-digit International Standard Industrial Classification, ISIC rev. 4) and their interactions with a country’s GDP
per capita (log, demeaned) to control for structural differences between countries.
To control for individual characteristics and skill levels, we include variables for age (10-year age groups),
gender, education level (primary, secondary, tertiary), and a test-based measure of literacy skills (four
proficiency levels). The literacy test comprehensively quantifies individuals’ skills to understand, evaluate, use,

7
and engage with written texts in personal, work-related, societal, and educational contexts (PIAAC Literacy
Expert Group, 2009).
We estimate the regression for all workers, and two main subsamples: workers in offshorable and non-
offshorable occupations. We apply the allocation proposed by Blinder and Krueger (2013), see Table A3 in
Appendix A for details. In all worker-level regressions, standard errors are clustered at the country-sector level.

b. Pooled sample regression results

We start by regressing worker-level RTI against backward and forward GVC participation at the country-sector
level and a set of controls (see econometric model, 2) in the pooled sample of 47 countries. Overall, we find no
correlation between backward GVC participation and the average RTI, while a higher forward GVC participation
is associated with a higher RTI of workers. The latter correlation decreases with rising development levels, as
indicated by the negative interaction term between GVC participation and GDP per capita (Table 1, column 1).
These findings confirm our intuition: workers in higher-income countries perform fewer routine-intensive tasks.
Hence, a higher forward GVC participation in such country settings captures higher value-added tasks such as
R&D rather than repetitive upstream tasks as would be the case in commodity-exporting countries.
However, the relationship between GVC participation and the RTI of workers may differ between types of
occupations. To shed light on this hypothesis, we divide the sample into offshorable and non-offshorable
occupations, using the preferred classification proposed by Blinder and Krueger (2013). In line with our
assumption, the correlation between these occupational groups differs. We find no correlation between GVC
participation and RTI among workers performing non-offshorable occupations (Table 1, column 2). However,
among workers in occupations classified as offshorable, higher backward and forward GVC participation is
linked with a higher average RTI (Table 1, Columns 2 and 3).
As backward and forward GVC participation measures are standardized within the sample, the larger (in
absolute terms) coefficient of backward GVC participation suggests this variable’s relatively greater importance
relative to forward GVC participation.9 The worker-level RTI is standardized with the United States mean and
standard deviation, to provide a reference point and comparability with the widely used (Acemoglu & Autor,
2011) RTI measure based on the US O*NET data. The interpretation would be the following. An increase in
backward (forward, resp.) GVC participation by one standard deviation is associated with a rise in worker-level
RTI by 0.079 (0.053, resp.) the US standard deviations.
The negative interaction terms with GDP per capita for both GVC measures imply that the relationship between
GVC participation and RTI weakens with countries’ development levels. We provided the rationale for this finding
in the case of forward GVC participation under the overall findings in the previous paragraph. Similarly, higher
backward GVC participation in high-income countries captures more high-value added worker tasks – even in
the assembly stage – while in lower-income countries, those tasks tend to be more repetitive (think of
technician operating machines in the former versus assembly line workers in the latter). For example, in Ecuador
(relatively low GDP per capita, about 1 log point below the sample average), one standard deviation higher
backward GVC participation among workers performing offshorable occupations is associated with RTI higher
by 0.133. In contrast, in Canada (relatively high GDP per capita, about 1 log point above the sample average), it
is associated with RTI higher by only 0.025. Considering that backward GVC participation in both countries is

9
As a robustness check, we run models for backward and forward GVC participation measures separately, rather than
combining them in one joint regression, and obtain similar results (Table 1A, Panel A in Appendix A).

8
at a similar level (12-14%), the positive association between backward GVC participation and the RTI is stronger
in Ecuador, due to the interaction term with GDP per capita.
Table 1. The relationship between GVC participation and RTI, total and by occupation type, standardized
Dependent variable: worker level RTI (1) (2) (3)
All Non- Offshorable
workers offshorable
Backward Global Value Chain participation (GVCB) share in exports
(std.) 0.004 -0.016 0.079***
(0.019) (0.020) (0.024)
GVCB share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] 0.017 0.027 -0.054*
(0.029) (0.030) (0.032)
Forward Global Value Chain participation (GVCF) share in exports
(std.) 0.019* 0.011 0.053***
(0.010) (0.011) (0.014)
GVCF share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.060*** -0.059*** -0.074***
(0.012) (0.013) (0.017)
Ln(GDP per capita) –mean(Ln(GDP per capita)) 0.033 0.041 -0.014
(0.038) (0.038) (0.060)
Observations 167,034 144,914 22,120
Note: ***p < 0.01, **p < 0.05, *p < 0.1. Standard errors in parentheses. Standardized weights are used that give each country equal
weight. The standard errors are clustered at a sector × country level. Measures for GVCB share and GVCF share are standardized. All
regressions include controls for technology (computer use, computer use squared), FDI, skills, education, age, gender, sector FE, and
sector FE interacted with GDP per capita.
Source: Authors’ calculations based on PIAAC, STEP, CULS (tasks), World Bank (GDP), EORA data and Borin and Mancini (2015, 2019)
(GVC participation measures).

c. Sector-specific regression results

Next, we study differences between broad sectors by estimating regressions for specific subsamples. We
distinguish three broad sectors – industry (B-F ISIC rev. 4 sections), business services (G-N ISIC rev. 4 sections),
and other services (O-S ISIC rev. 4 sections). For details, see Table A2 in Appendix A.
For the industrial sector, we find no correlation between backward GVC participation and RTI. In contrast, a
higher forward GVC participation is linked to more routine tasks, although decreasing with development level
(Table 2, Panel A, column 1). We also find no correlation between backward and forward GVC participation and
the RTI among non-offshorable occupations (Table 2, Panel A, column 2). Both these patterns are consistent
with the overall results for all sectors (Table 1). However, in the case of offshorable occupations, the higher the
backward GVC participation is in a country and sector, the higher the workers’ RTI (Table 2, Panel A, Column 3).
We also find a positive association between forward GVC participation and RTI among workers in offshorable
occupations (Table 2, panel B, column 3), again confirming the pooled sample’s results (Table 1).
However, a negative interaction term of GVC participation with GDP per capita in industrial sectors suggests
that the development level counterbalances this relationship. In contrast to the overall results (Table 1), this
interaction term is insignificant for backward GVC participation. Hence, workers in industrial sectors and
countries specialized in smaller segments of GVC (e.g., assemblers of final products) tend to perform more
routine-intensive tasks. For forward GVC participation, the interaction term with GDP per capita is negative and
significant, in line with the overall results (Table 1). In countries with GDP per capita twice the average in our
sample (comparable to the United States), the interaction term offsets the coefficient of forward GVC
participation, so the overall association with RTI is 0.10 Our findings align with the literature: manufacturing of

10
We obtain similar results for manufacturing (ISIC rev. 4 section C) rather than industry – results are available upon
request.

9
low-value-added, basic intermediates that require more routine-intensive work tends to be outsourced to less
developed countries (factory economies), while the production of non-routine tasks remains in countries at
higher development levels (Baldwin, 2013).
Table 2. The relationship between GVC participation and RTI, total and by sector and occupation type, standardized
Dependent variable: worker-level RTI (1) (2) (3)
Panel A: Industry All Non- Offshorable
workers offshorable
Backward Global Value Chain participation (GVCB) share in exports
(std.) 0.027 -0.007 0.092***
(0.024) (0.027) (0.029)
GVCB share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] 0.004 0.018 -0.021
(0.032) (0.036) (0.040)
Forward Global Value Chain participation (GVCF) share in exports (std.) 0.030** 0.008 0.062***
(0.015) (0.018) (0.019)
GVCF share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.043*** -0.030 -0.079***
(0.017) (0.020) (0.023)
Ln(GDP per capita) –mean(Ln(GDP per capita)) -0.096 0.006 -0.304***
(0.066) (0.081) (0.103)
Observations 38,917 28,790 10,127
Panel B: Business services
Backward Global Value Chain participation (GVCB) share in exports
(std.) -0.055** -0.056** -0.002
(0.024) (0.027) (0.044)
GVCB share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] 0.063* 0.083** -0.080*
(0.037) (0.039) (0.047)
Forward Global Value Chain participation (GVCF) share in exports (std.) -0.015 -0.020 0.019
(0.016) (0.017) (0.024)
GVCF share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.046*** -0.043** -0.064**
(0.017) (0.017) (0.029)
Ln(GDP per capita) –mean(Ln(GDP per capita)) -0.027 -0.017 -0.067
(0.049) (0.049) (0.078)
Observations 71,979 63,003 8,976
Panel C: Other services
Backward Global Value Chain participation (GVCB) share in exports
(std.) 0.220*** 0.206*** 0.396***
(0.079) (0.079) (0.152)
GVCB share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.329*** -0.326*** -0.400
(0.114) (0.114) (0.257)
Forward Global Value Chain participation (GVCF) share in exports (std.) 0.029 0.023 0.116**
(0.023) (0.023) (0.057)
GVCF share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.073** -0.077** 0.013
(0.032) (0.032) (0.064)
Ln(GDP per capita) –mean(Ln(GDP per capita)) -0.210*** -0.126* -0.129
(0.076) (0.074) (0.180)
Observations 50,843 48,133 2,710
Note: ***p < 0.01, **p < 0.05, *p < 0.1. Standard errors in parentheses. Standardized weights are used that give each country equal
weight. The standard errors are clustered at a sector × country level. Measures for GVCB share and GVCF share are standardized. All
regressions include controls for technology (computer use, computer use squared), FDI, skills, education, age, gender, sector FE, and
sector FE interacted with GDP per capita.
Source: Authors’ calculations based on PIAAC, STEP, CULS (tasks), World Bank (GDP), EORA data and Borin and Mancini (2015, 2019)
(GVC participation measures).

In business services, we find a negative association between backward GVC participation and workers’ RTI
(Table 2, Panel B, column 1). Due to the positive interaction term with GDP per capita, this effect is weaker in
countries at higher development levels: it disappears in countries with GDP per capita twice the sample average,
comparable to the United States, and becomes positive in countries with even higher GDP per capita (e.g.,

10
Norway). In contrast to the overall sample (Table 1), these results are driven by non-offshorable occupations,
whereas the coefficients among offshorable occupations are insignificant (Table 2, Panel B, columns 2 and 3).
This could reflect that services are less tradeable than manufactured goods and involve more occupations that
cannot be offshored (e.g., truck drivers, see also the list of occupations by offshorability in Table A3).
In other services – much less integrated into GVCs than the other two broad sectors11 – higher backward GVC
participation correlates with higher worker-level RTI (Table 2, Panel C, column 1), contrasting the overall sample
results (Table 1). The net ‘effect’ depends on a country’s development level. Results for offshorable occupations
are similar to the pooled sample: in countries with a GDP per capita lower than 170% of the average in our
sample (comparable to Canada or Austria), backward GVC participation is associated with more routine
intensive work, and in countries with GDP per capita above this level – with less routine intensive work (Table
2, Panel C, columns 1-2). Similarly, higher forward GVC participation is linked to higher RTI at the worker level
(Table 2, Panel C, column 3).

d. Robustness check: Occupation by skill intensity

As a robustness check for differences between occupational groups, we re-estimate the regressions of Section
c. We focus on occupational groups by their skill levels rather than between offshorable and non-offshorable
occupations. We distinguish between by high-skilled (managers, professionals, technicians – ISCO 1-3),
medium-skilled (clerical workers, sales and services workers – ISCO 4-5) and low-skilled (craft and related
trades workers, plant and machine operators, elementary occupations – ISCO 7-9) occupations. This
classification of occupations follows the standard typology of the International Labour Organisation, and was
used by Lewandowski et al. (2022). These occupational groups perform tasks with different routine intensities.
On average, workers in high-skilled occupations perform relatively non-routine tasks, workers in middle-skilled
occupations moderately routine-intensive tasks, and workers in low-skilled occupations more routine-intensive
tasks.
Results for high-skilled occupations somewhat resemble those for non-offshorable occupations, while results
for medium- and low-skilled occupations resemble those for offshorable occupations (see Table B2 in Appendix
B). Importantly, we observe almost identical patterns in correlations between GVC participation and RTI for
specific sectors. It confirms that distinguishing between industries is crucial for studying the relationship
between GVC participation and labor market outcomes. Our results suggest that the relationship between GVC
participation and RTI differs substantially between the industrial and business services sectors. In the industrial
sector, higher GVC participation is associated with more routine intensive work in offshorable occupations that
usually demand low to medium levels of skills. In business services, it is associated with less routine intensive
work in non-offshorable occupations, which often require higher skills.

11
On average, backward GVC participation in other services is 17.4 pp lower than in industry, and forward GVC participation
is 3.3 pp lower (differences estimated as broad sector fixed effects in regressions on GVC participation measures,
controlling also for country fixed effects).

11
4. Global value chain participation and wage inequality within countries

a. Econometric model and decomposition method

As a higher RTI is negatively correlated with earnings, both at the occupation and worker level (Autor & Handel,
2013; de la Rica et al., 2020), GVC participation may widen wage inequality between workers in offshorable
occupations and those in non-offshorable occupations. In this section, we study the contribution of GVC
participation to wage inequality within countries. We distinguish between two channels: (1) the direct
contribution of GVC participation to individual wages, and (2) the indirect contribution of GVC participation
through its relationship with workers’ RTI. We calculate the Gini coefficient to quantify the relationship between
GVC participation and inequality. The diagram in Figure 3 exemplifies our reasoning. Our analysis includes four
steps.
Figure 4. Diagram of wage inequality analysis.

Source: Own elaboration.

In the first step, we divide our sample into six subsamples by broad sector of employment (industry, business
services and other services) and occupation (offshorable and non-offshorable), as introduced in section 3. For
each subsample, we estimate the following Mincerian wage regression:
𝑤𝑖𝑗𝑠𝑐 = 𝛽0 + 𝛽1 𝐺𝑠𝑐 + 𝛽2 𝑍𝑠𝑐 + 𝛽3 𝑋𝑖𝑗𝑠𝑐 + 𝛽3 𝑅𝑇𝐼𝑖𝑗𝑠𝑐 + 𝜆𝑗 + 𝜖𝑖𝑗𝑠𝑐 (3)

where, 𝑤𝑖𝑗𝑠𝑐 is the wage of individual 𝑖 in occupation 𝑗 in sector 𝑠 in country 𝑐; while the rest of the notation
follows equation (2). Our key variable of interest in the wage regression is worker-level RTI. Based on the
estimated coefficients for each right-hand side variable, we predict wages for workers in each of the six
subpopulations. For each country, we then calculate the Gini coefficient, our baseline scenario. Appendix A gives
a more detailed description, including formulas for the underlying methodology, which we outline below.
In the second step, we assess the direct contribution of GVC participation to wage inequality. We assume a
second scenario of no GVC participation and calculate predicted wages conditional on GVC participation values
in equation (3) equal to zero (i.e., 𝐺𝑠𝑐 = 0) for each of the six subsamples. Then, we re-calculate the Gini

12
coefficient of predicted wages for each country in this second scenario. We define the direct contribution of
GVC participation to within-country wage inequality as the difference between the Gini coefficient of wages
calculated in the baseline scenario and the Gini coefficient of wages obtained in the scenario of no GVC
participation.
In the third step, we analyze the indirect contribution of GVC participation to wage inequality, through its
relationship with workers’ RTI. Specifically, we use the estimated coefficients for the six sub-samples following
equation (2) to predict worker-level RTI, now assuming GVC participation values equal to zero. In other words,
we compute counterfactual workers’ RTI in the economy under the scenario of no GVC integration. We then use
the estimated models for the six sub-samples following equation (3) to predict wages, conditional on these new
counterfactual RTI values. To isolate the indirect contribution of GVC participation to wages through its
relationship with workers’ RTI, we use the observed values of GVC participation in this wage model (rather than
setting their values to zero), which is the counterfactual RTI scenario. We define the indirect contribution of GVC
participation to wage inequality as a difference between the Gini coefficient of wages calculated in the baseline
scenario and the Gini coefficient of wages obtained in the counterfactual scenario.
In the fourth step, we calculate the total contribution of GVC participation to wage inequality. We set the GVC
participation values in equation (3) to zero (as in the calculation of the direct contribution), and we use the
counterfactual RTI conditional on no GVC participation (as in the calculation of the indirect contribution) to
calculate wages using the original coefficients estimated in the six models. We identify the total contribution
of GVC participation to wage inequality as the difference between the Gini coefficient of wages in the baseline
scenario and the Gini coefficients of wages in this last scenario.
Importantly, we estimate equations (2) and (3) for six sub-samples for different combinations of broad sectors
(industry, business services and other services) and occupation types (offshorable and non-offshorable) to
capture the likely different contributions of GVC participation in these worker subgroups. The relationship
between GVC participation, RTI and wages may differ between the industrial and services sectors, as products
created in the industrial sector are more tradeable and easier to fragment, especially in manufacturing. Also,
offshorable occupations may be more vulnerable to wage adjustments than non-offshorable occupations.

b. Sector-specific regression results

In this subsection, we explore the contribution of GVC participation to within-country wage inequality,
distinguishing between its direct and indirect contributions through workers’ RTI. Our approach likely provides
an upper bound, as we use cross-sectional regression that describes the equilibrium allocation of tasks and
wages across workers in different countries. GVC participation may be partly endogenous to comparative
advantage in tasks and pre-existing wage-level differences. For this reason, we focus on the contribution of
GVC participation to within-country wage inequality rather than cross-country differences in wage levels.
Moreover, only a small share of cross-country differences in RTI can be attributed to globalization, as
differences in technology use and skill supply play a much larger role (Lewandowski et al., 2022).
We first estimate the relationship between RTI and individual-level wages in Mincerian wage regressions
(equation 3), for each of the six subpopulations by broad sector and occupation type (Table 3). The regression
results consistently show a significant and negative association between workers’ RTI and wages, in all types
of occupations and sectors; that is, more routine intensive tasks tend to pay lower wages. The magnitude is the
largest among offshorable occupations in business services, suggesting a particularly strong wage penalty for
performing routine tasks in this sector (column 4). The wage penalty for more routine tasks is the second
largest among offshorable occupations in industrial sectors (column 2). It is smaller in non-offshorable

13
occupations in the industrial (column 1) and business services (column 3) sectors, but not in other services
(columns 5 and 6).
Table 3. The relationship between RTI, GVC participation, and wages, by sector and occupation type, standardized
Dependent variable: worker- Industry Business services Other services
level wages (1) (2) (3) (4) (5) (6)
Non- Offshorable Non- Offshorable Non- Offshorable
offshorable offshorable offshorable
Routine Task Intensity (RTI, std) -1.646*** -1.704*** -1.593*** -2.116*** -1.514*** -1.206***
(0.147) (0.206) (0.109) (0.238) (0.101) (0.247)
Backward GVC participation 0.134 0.141 0.394** -0.589* 0.712 0.089
(GVCB) share in exports (std.) (0.165) (0.167) (0.186) (0.300) (0.558) (0.913)
GVCB share (std.) * [Ln(GDP pc) 0.084 0.045 0.127 -0.196 0.519 1.182**
–mean(Ln(GDP pc)] (0.059) (0.074) (0.080) (0.133) (0.391) (0.552)
Forward GVC participation 0.404*** -0.146 0.761*** 0.123 -0.010 0.595
(GVCF) share in exports (std.) (0.147) (0.100) (0.140) (0.193) (0.371) (0.516)
GVCF share (std.) * [Ln(GDP pc) 0.265*** -0.002 0.338*** -0.165 -0.166 -1.109***
–mean(Ln(GDP pc)] (0.058) (0.047) (0.077) (0.129) (0.161) (0.231)
Ln(GDP per capita) – 0.268* 0.440** -0.017 0.446** 0.198 -0.061
mean(Ln(GDP per capita)) (0.157) (0.205) (0.106) (0.195) (0.668) (0.717)
Observations 18,647 7,600 38,659 6,714 31,523 2,091
Note: ***p < 0.01, **p < 0.05, *p < 0.1. Standard errors in parentheses. Standardized weights are used that give each country equal
weight. The standard errors are clustered at a sector × country level. Measures for GVCB share and GVCF share are standardized.
All regressions include controls for technology (computer use, computer use squared), skills, education, age, gender, sector FE, and
country FE. The wage data for Canada, China, Hungary, Macedonia (FYROM), Peru, Serbia, Singapore, Sweden, and Türkiye are
unavailable; therefore, these countries are excluded from the sample.
Source: Authors’ calculations based on PIAAC, STEP, CULS (tasks), World Bank (GDP), EORA data, and Borin and Mancini (2015,
2019) (GVC participation measures).

At the same time, the relationship between GVC participation and wages is significant only in some types of
occupations and sectors. First, higher forward GVC participation is associated with higher wages among
workers in non-offshorable occupations in the industrial and business services sectors. This could indicate high
value-added tasks such as R&D upstream in GVCs which are more difficult to offshore and thus pay high wages.
Second, more backward GVC participation is associated with higher wages only in business services –
positively in non-offshorable occupations, and negatively in offshorable occupations.

Due to the unavailability of wage data, we had to exclude Canada, China, Hungary, Macedonia (FYROM), Peru,
Serbia, Singapore, Sweden and Türkiye from the previous analysis. Table 4 thus replicates the results of Table
2 for the reduced country sample when assessing the relationship between GVC participation and RTI. The
estimated coefficients shown in Tables 2 and 4 differ slightly. Still, the findings are the same: more backward
and forward GVC participation are associated with higher RTI among workers in offshorable occupations in the
industrial sector, especially for countries at the average development level in our sample, but with a lower RTI
among workers in non-offshorable occupations in business services (Table 4).

14
 Table 4. The relationship between GVC participation and RTI, by sector and occupation type, standardized
Dependent variable: worker- Industry Business services Other services
level RTI (1) (2) (3) (4) (5) (6)
Non- Offshorable Non- Offshorable Non- Offshorable
offshorable offshorable offshorable
Backward GVC participation -0.004 0.074*** -0.038* 0.041 0.204*** 0.353***
(GVCB) share in exports (std.) (0.025) (0.024) (0.021) (0.032) (0.049) (0.099)
GVCB share (std.) * [Ln(GDP pc) 0.009 -0.014 0.078*** -0.030 -0.221*** -0.259
–mean(Ln(GDP pc)] (0.030) (0.031) (0.026) (0.031) (0.080) (0.199)
Forward GVC participation -0.002 0.092*** -0.015 0.044* -0.057* 0.107
(GVCF) share in exports (std.) (0.019) (0.018) (0.018) (0.024) (0.032) (0.071)
GVCF share (std.) * [Ln(GDP pc) -0.026 -0.080*** -0.039** -0.083*** 0.039 0.074
–mean(Ln(GDP pc)] (0.020) (0.021) (0.017) (0.028) (0.039) (0.079)
Ln(GDP per capita) – -0.124** -0.139 0.017 -0.010 -0.037 -0.065
mean(Ln(GDP per capita)) (0.060) (0.125) (0.052) (0.075) (0.096) (0.138)
Observations 21,023 8,364 44,351 7,578 34,540 2,326
Note: ***p < 0.01, **p < 0.05, *p < 0.1. Standard errors in parentheses. Standardized weights are used that give each country equal
weight. The standard errors are clustered at a sector × country level. Measures for GVCB share and GVCF share are standardized. All
regressions include controls for technology (computer use, computer use squared), FDI, skills, education, age, gender, sector FE, and
sector FE interacted with GDP per capita. The specification follows that in Table 2, but for consistency with Table 3, Canada, China,
Hungary, Macedonia (FYROM), Peru, Serbia, Singapore, Sweden, and Türkiye (for which wage data are not available) are excluded.
Source: Authors’ calculations based on PIAAC, STEP, CULS (tasks), World Bank (GDP), EORA data. and Borin and Mancini (2015,
2019) (GVC participation measures).

c. Quantifying the direct and indirect contribution of GVC participation to wage inequality
In this subsection, we use the estimated models to quantify the contribution of GVC participation to wage
inequality in the reduced country sample of 38 countries, both directly and indirectly. We find that the direct
contribution of GVC participation to wage inequality is negative in most countries (Figure 5a). In other words,
higher GVC participation is linked to reduced wage inequality within countries. Some notable exceptions include
the US and small countries intensively integrated into GVC, such as Ireland (high backward GVC participation)
or Norway (high forward GVC participation). The results suggest a U-shaped relationship between GDP per
capita and the direct contribution of GVC participation to wage inequality (Figure 5a). That is, the reduction in
wage inequality is the strongest in upper-middle-income and bottom-high-income countries, but the smallest in
low-income countries (which are weakly integrated into GVCs) and high-income countries. The Mincerian wage
regressions suggest that the direct contribution reflects the positive role of forward GVCs for workers' wages
in non-offshorable occupations in the industrial and business services sectors (Table 3).
In sharp contrast, the indirect contribution of GVC participation to wages through its link with workers’ RTI
widens wage inequality in most countries (Figure 5b). Contrasting relationships between GVC participation and
RTI among different groups of workers drive this pattern. The Mincerian wage regressions suggest a negative
relationship between the RTI of workers and individual wages in all sectors and occupation types (Table 3). So,
a higher GVC integration is associated with wider within-country wage inequality through larger RTI gaps
between workers in offshorable and non-offshorable occupations in different sectors. In most countries, the
indirect contribution is smaller in absolute terms than the direct contribution.

15
Figure 4. The contribution of GVC participation to within-country wage inequality
a)

b)

c)

Source: Authors’ calculations based on PIAAC, STEP, CULS (tasks), EORA data and Borin and Mancini (2015, 2019) (GVC participation
measures).

16
 Finally, we combine the direct and indirect channels to assess the total (net) contribution of GVC participation
to wage inequality within countries (Figure 5c).12 We find that GVC participation is linked to higher wage
inequality in the top high-income countries, such as the US and Ireland, which in most cases is driven by the
indirect contribution of GVCs through its links with worker RTI. At the same time, GVC participation is
associated with reduced wage inequality in most low- and middle-income countries (in particular Kenya and
Ghana, but also Mexico), as well as the bottom high-income countries (Central Eastern and Southern Europe,
in particular, Czechia and Poland) where the direct reduction in wage inequality is stronger than the indirect
contribution.
The findings can be interpreted as follows. Our results suggest that in countries that mostly receive offshored
jobs, GVC participation reduces wage inequality, despite widening the gap in the RTI of work between
offshorable and non-offshorable occupations. However, in rich countries that mostly offshore jobs, GVC
participation widens wage inequality as it benefits mainly workers in non-offshorable occupations in
services.13

5. Conclusions and policy implications

In this paper, we investigated the relationship between GVC participation and the RTI of workers and its
contribution to within-country wage inequality. We used a unique dataset combining worker-level, country-
specific RTI measures based on a pooled sample of survey data for 47 (38, resp.) countries at all development
levels, applying the methodology of Lewandowski et al. (2022), with measures of backward and forward GVC
participation at the country-sector level based on the method of Borin and Mancini (2019, 2015). We find that
the relationship between GVC participation and the RTI of workers is complex and depends on the nature of
GVCs, occupations and sectors. This study also finds that GVC participation contributes to wage inequality
within countries directly and indirectly through its relationship with workers’ RTI.

First, we found that the relationship between GVC participation and RTI differs between types of GVC
participation: higher forward GVC participation correlates with more RTI of workers, while higher backward GVC
participation does not. Importantly, these associations differ across occupational groups. In countries and
sectors with higher GVC participation of either type, workers in offshorable occupations perform more routine-
intensive work, with weaker associations for higher-income countries. At the same time, we find no such results
among workers in non-offshorable occupations.

Second, the industrial sector, which produces primarily tradable goods, follows this general pattern, whereas
business services, which are tradable to a lesser extent, do not. Higher backward GVC participation is
associated with less routine-intensive tasks in business services, especially among workers in non-offshorable

12
As the Gini coefficient is a non-linear measure, the sum of Gini coefficients with two separate shocks (direct and indirect
effect) does not necessarily equal the Gini coefficient simulated with the same two shocks jointly (total effect). The
residual, however, is relatively small compared to the total contribution (see Figure B1 in Appendix A).
13
Our approach may raise the question if the RTI and wage regressions can be estimated separately. We use seemingly
unrelated regression (SUR) to test the validity of our results. We find that separate estimation is correct. First, we find no
correlation between the residuals from RTI and wage models, suggesting that they are unrelated. Additionally, we confirm
that error terms have fairly symmetric distributions required for the estimator to be unbiased in small samples. Second,
the point estimates are consistent with those obtained from separate estimations. Minor differences occur due to slight
differences in the estimation sample. Some individuals do not report their wages, resulting in slightly smaller sample sizes
than RTI models (see Tables 3 and 4). The SUR approach requires samples of both models to be equal, so the RTI sample
must be reduced to a wage sample. The SUR estimates are available upon request.

17
occupations, but with more routine-intensive tasks in other services. Focusing on the skill content of
occupations as a robustness check shows that results for high-skilled occupations somewhat resemble those
for non-offshorable occupations. In contrast, results for medium- and low-skilled occupations resemble those
for offshorable occupations.

Third, we studied the contribution of GVC participation to within-country wage inequality: direct and indirect
through its relationship with the workers’ RTI. GVC participation is associated with larger wage inequality in
most high-income countries, but with reduced wage inequality in most low- and middle-income countries. Its
indirect contribution to wage inequality – widening the gap between the RTI of workers in offshorable
occupations in the industrial sector and workers in non-offshorable occupations in business services sectors
– is a crucial mechanism.

Understanding the differences in the RTI of workers across the development spectrum and its relationship with
fundamental factors – technology adoption, skill supply, and globalization – has important policy implications.
The transition from routine to non-routine work has been a key dimension of structural change in labor markets,
increasing worker productivity and earnings. Jobs with a higher non-routine content involve higher levels of
technology, require higher skill levels, and offer higher earnings between and within occupations (Autor &
Handel, 2013; de la Rica et al., 2020). Diverging effects of globalization on the RTI of different types of workers
can thus contribute to wage inequality within countries.

At the same time, cross-country differences in RTI, especially between high- versus low- and middle-income
countries, are larger than implied by mere cross-country differences in skills supply, as they can be mainly
attributed to differences in technology use (Lewandowski et al., 2022). Investments in education and skills in
developing and emerging economies are frequently cited as necessary conditions to foster shared prosperity
(World Bank, 2019). They are also often highlighted to counter the adverse labor market effects of increased
technology adoption in developing countries. The mediating role of worker skills becomes even more urgent
amid rapid advances in artificial intelligence, such as recent developments of Chat-GPT and GPT-4. While they
are most likely required to achieve these goals, they are unlikely to be sufficient, given that differences in job
task content are largely related to differences in technology use and participation in GVCs. In any case, policies
to increase technology use and approaches to facilitate upgrading in GVCs should complement investments in
skills, especially since technological change within GVCs tends to increase the relative demand for non-routine
work (Reijnders & de Vries, 2018).

Our study has limitations. First, it does not claim to have determined a causal effect. Since the survey data were
collected once per country, only cross-sectional analysis is possible. The analysis therefore cannot capture
wage changes over time or cases where GVC participation created new labor market segments that did not
exist before. In the future, the second round of PIAAC data collection will allow running a quasi-panel study to
study the relationship between changes in GVC participation, technology use, and the supply of skills, with the
RTI of particular occupations in various countries. Second, the survey data do not distinguish between domestic
and foreign-owned firms, so it is unclear if FDI correlates with RTI differences within sectors. Lewandowski et
al. (2022) showed that FDI is not a significant factor behind RTI differences between sectors, but there may be
a relationship within sectors. Third, adult skill surveys have greatly improved our understanding of skills supply
and the quality of education worldwide. It is possible, though, that literacy or numeracy measures are
insufficient to fully understand factors behind differences in the nature of work, task content of jobs, and
productivity. Differences in managerial and interpersonal skills may also contribute to differences in organizing
and performing work. These skills are unfortunately not measured in the same survey data that capture worker
tasks. Finally, the estimated contribution of technology adoption to worker-level RTI may likely increase in the

18
future. Advances in artificial intelligence may more strongly affect business services tasks, the extent of
offshoring, and thus the relationship between GVC participation and RTI.

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Appendix A – Methodological details

a. Measurements and classifications

Table A1. The task items selected to calculate task content measures with the US PIAAC data
Non-routine cognitive
Task content Non-routine cognitive analytical Routine cognitive Manual
interpersonal
Solving problems Supervising others Changing order of tasks Physical
Reading news Making speeches or - reversed (not able) tasks
(at least once a month) giving presentations Filling out forms (at least
Reading professional journals (any frequency) once a month)
Task items (at least once a month) Making speeches or
Programming giving presentations -
(any frequency) reversed (never)

Correlation with
O*NET-based 0.77 0.72 0.55 0.74
measures
Note: The cut-offs for the “yes” dummy in brackets. For the full wording of questions and definitions of cutoff see Lewandowski et al.
(2022). O*NET-based measures are based on Acemoglu and Autor (2011).
Source: Lewandowski et al. (2022).
Table A2. Wide sectors aggregation, ISIC rev. 4/ NACE rev. 2
Section Tittle Wide sector
B Mining and quarrying Industry
C Manufacturing: Industry
-Food and Beverages Industry
-Textiles and Wearing Apparel Industry
-Wood and Paper Industry
-Petroleum, Chemical and Non-Metallic Mineral Products Industry
-Metal Products Industry
-Electrical and Machinery Industry
-Transport Equipment Industry
-Other Manufacturing Industry
D Electricity, gas, steam and air conditioning supply Industry
E Water supply, sewerage, waste management and remediation activities Industry
F Construction Industry
G Wholesale and retail trade; repair of motor vehicles and motorcycles Business services
I Accommodation and food service activities Business services
H Transportation and storage Business services
J Information and communication Business services
K Financial and insurance activities Business services
L Real estate activities Business services
M Professional, scientific and technical activities Business services
N Administrative and support service activities Business services
O Public administration and defense; compulsory social security Other services
P Education Other services
Q Human health and social work activities Other services
R Arts, entertainment and recreation Other services
S Other service activities Other services
Source: Authors’ elaboration.

23
Table A3. Offshorability and task groups allocation by occupations, ISCO08 2-digit
ISCO 08 Offshorability Task Title
code group
11 not offshorable NRCP Chief Executives, Senior Officials and Legislators
12 not offshorable NRCP Administrative and Commercial Managers
13 not offshorable NRCP Production and Specialized Services Managers
14 not offshorable NRCP Hospitality, Retail and Other Services Managers
21 not offshorable NRCA Science and Engineering Professionals
22 not offshorable NRCA Health Professionals
23 not offshorable NRCP Teaching Professionals
24 not offshorable NRCA Business and Administration Professionals
25 offshorable NRCA Information and Communications Technology Professionals
26 not offshorable NRCA Legal, Social and Cultural Professionals
31 not offshorable NRCA Science and Engineering Associate Professionals
32 not offshorable NRCP Health Associate Professionals
33 not offshorable RC Business and Administration Associate Professionals
34 not offshorable RC Legal, Social, Cultural and Related Associate Professionals
35 not offshorable NRCA Information and Communications Technicians
41 offshorable RC General and Keyboard Clerks
42 not offshorable RC Customer Services Clerks
43 offshorable RC Numerical and Material Recording Clerks
44 not offshorable RC Other Clerical Support Workers
51 not offshorable NRM Personal Services Workers
52 not offshorable RC Sales Workers
53 not offshorable NRM Personal Care Workers
54 not offshorable NRM Protective Services Workers
61 not offshorable NRM Market-oriented Skilled Agricultural Workers
62 not offshorable NRM Market-oriented Skilled Forestry, Fishery and Hunting Workers
63 not offshorable NRM Subsistence Farmers, Fishers, Hunters and Gatherers
71 not offshorable NRM Building and Related Trades Workers (excluding Electricians)
72 not offshorable RM Metal, Machinery and Related Trades Workers
73 offshorable RM Handicraft and Printing Workers
74 not offshorable NRM Electrical and Electronic Trades Workers
75 not offshorable RM Food Processing, Woodworking, Garment and Other Craft and Related
Trades Workers
81 offshorable RM Stationary Plant and Machine Operators
82 offshorable RM Assemblers
83 not offshorable NRM Drivers and Mobile Plant Operators
91 not offshorable NRM Cleaners and Helpers
92 not offshorable NRM Agricultural, Forestry and Fishery Laborers
93 not offshorable NRM Laborers in Mining, Construction, Manufacturing and Transport
94 not offshorable RM Food Preparation Assistants
95 not offshorable NRM Street and Related Sales and Services Workers
96 not offshorable NRM Refuse Workers and Other Elementary Workers
Note: NRCA- Non-Routine Cognitive Analytical, NRCP- Non-Routine Cognitive Personal, RC- Routine Cognitive, RM-
Routine Manual, NRM- Non-Routine Manual.
Source: own elaboration based on (Acemoglu & Autor, 2011; Blinder & Krueger, 2013).

24
Table A4. List of countries used in the study
Country name Country ISO3 Source Survey year RTI sample Wage sample
Armenia ARM STEP 2013 yes yes
Austria AUT PIAAC 2012 yes yes
Belgium BEL PIAAC 2012 yes yes
Bolivia BOL STEP 2012 yes yes
Canada CAN PIAAC 2012 yes no
Chile CHL PIAAC 2015 yes yes
China CHN CULS 2016 yes no
Colombia COL STEP 2012 yes yes
Cyprus CYP PIAAC 2012 yes yes
Czechia CZE PIAAC 2012 yes yes
Denmark DNK PIAAC 2012 yes yes
Ecuador ECU PIAAC 2017 yes yes
Estonia EST PIAAC 2012 yes yes
Finland FIN PIAAC 2012 yes yes
France FRA PIAAC 2012 yes yes
Georgia GEO STEP 2013 yes yes
Germany DEU PIAAC 2012 yes yes
Ghana GHA STEP 2013 yes yes
Greece GRC PIAAC 2015 yes yes
Hungary HUN PIAAC 2017 yes no
Indonesia IDN PIAAC 2015 yes yes
Ireland IRL PIAAC 2012 yes yes
Israel ISR PIAAC 2015 yes yes
Italy ITA PIAAC 2012 yes yes
Japan JPN PIAAC 2012 yes yes
Kazakhstan KAZ PIAAC 2017 yes yes
Kenya KEN STEP 2013 yes yes
Korea, Rep. KOR PIAAC 2012 yes yes
Lao PDR LAO STEP 2012 yes yes
Lithuania LTU PIAAC 2015 yes yes
Macedonia, FYR MKD STEP 2013 yes no
Mexico MEX PIAAC 2017 yes yes
Netherlands NLD PIAAC 2012 yes yes
New Zealand NZL PIAAC 2015 yes yes
Norway NOR PIAAC 2012 yes yes
Peru PER PIAAC 2017 yes no
Poland POL PIAAC 2012 yes yes
Russian Federation RUS PIAAC 2012 yes yes
Serbia SRB STEP 2016 yes no
Singapore SGP PIAAC 2015 yes no
Slovak Republic SVK PIAAC 2012 yes yes
Slovenia SVN PIAAC 2015 yes yes
Spain ESP PIAAC 2012 yes yes
Sweden SWE PIAAC 2012 yes no
Türkiye TUR PIAAC 2015 yes no
United Kingdom GBR PIAAC 2012 yes yes
United States USA PIAAC 2012 yes yes
Source: own elaboration.

25
b. Wage inequality analysis
Baseline scenario
In a first step, we divide the full sample into six groups by broad sector (industry, business, and other services)
and type of occupation (offshorable and non-offshorable) and for each group estimate Mincerian wage
regressions of the following form:14

𝐵 𝐹 𝐵 𝐹
𝑤𝑖𝑗𝑠𝑐 = 𝛽0 + 𝛽1 𝑅𝑇𝐼𝑖𝑗𝑠𝑐 + 𝛽2 𝐺𝑉𝐶𝑠𝑐 + 𝛽3 𝐺𝑉𝐶𝑠𝑐 + 𝛽4 𝐺𝑉𝐶𝑠𝑐 ∗ 𝑂𝑈𝑇𝑠𝑐 + 𝛽5 𝐺𝑉𝐶𝑠𝑐 ∗ 𝑂𝑈𝑇𝑠𝑐
(1)
+ 𝛽6 𝑍𝑠𝑐 + 𝛽7 𝑋𝑖𝑗𝑠𝑐 + 𝜆𝑠 + 𝜌𝑐 + 𝜖𝑖𝑗𝑠𝑐

𝐵
where 𝑤𝑖𝑗𝑠𝑐 stands for hourly wages of individual 𝑖, in occupation 𝑗, in sector 𝑠, and in country 𝑐; 𝐺𝑉𝐶𝑠𝑐 is
𝐵
backward and 𝐺𝑉𝐶𝑠𝑐 forward GVC participation in sector 𝑠 and in country 𝑐; 𝑂𝑈𝑇𝑠𝑐 is output in sector 𝑠 and in
country 𝑐; 𝑍𝑠𝑐 measures technology in sector 𝑠 and in country 𝑐; 𝑋𝑖𝑗𝑠𝑐 are individual skills of worker 𝑖, in
occupation 𝑗, in sector 𝑠 and in country 𝑐; 𝜆𝑠 and 𝜌𝑐 are, respectively, sector and country fixed effects.
Based on the estimated coefficients from equation (1) and actual values for each right-hand side variables, we
𝑏𝑎𝑠𝑒
can predict wages (𝑤
̂ 𝑖𝑗𝑠𝑐 ) for each individual in the six groups. Formally:

𝑏𝑎𝑠𝑒 𝐵 𝐹 𝐵 𝐹
𝑤
̂ 𝑖𝑗𝑠𝑐 = 𝛽0 + 𝛽1 𝑅𝑇𝐼𝑖𝑗𝑠𝑐 + 𝛽2 𝐺𝑉𝐶𝑠𝑐 + 𝛽3 𝐺𝑉𝐶𝑠𝑐 + 𝛽4 𝐺𝑉𝐶𝑠𝑐 ∗ 𝑂𝑈𝑇𝑠𝑐 + 𝛽5 𝐺𝑉𝐶𝑠𝑐 ∗ 𝑂𝑈𝑇𝑠𝑐
(2)
+ 𝛽6 𝑍𝑠𝑐 + 𝛽7 𝑋𝑖𝑗𝑠𝑐 + 𝜆𝑠 + 𝜌𝑐

For each country, we then calculate the Gini coefficient (𝜌𝑐𝑏𝑎𝑠𝑒 ) of predicted wages:

𝑏𝑎𝑠𝑒
𝜌𝑐𝑏𝑎𝑠𝑒 = 𝑔𝑖𝑛𝑖(𝑤
̂ 𝑖𝑗𝑠𝑐 ) (3)

This is our baseline scenario.

Scenario of no GVC participation
In the second step, we assess the direct contribution of GVC participation to wage inequality (𝐸 𝑑𝑖𝑟𝑒𝑐𝑡 ). This is
based on the estimated models from equation (1), but based on predicted wages conditional on GVC
𝑑𝑖𝑟𝑒𝑐𝑡
participation values equal to zero (𝑤
̂ 𝑖𝑗𝑠𝑐 ). Formally:

𝑑𝑖𝑟𝑒𝑐𝑡
𝑤
̂ 𝑖𝑗𝑠𝑐 = 𝛽0 + 𝛽1 𝑅𝑇𝐼𝑖𝑗𝑠𝑐 + 𝛽2 ∗ 0 + 𝛽3 ∗ 0 + 𝛽4 ∗ 0 ∗ 𝑂𝑈𝑇𝑠𝑐 + 𝛽5 ∗ 0 ∗ 𝑂𝑈𝑇𝑠𝑐 + 𝛽6 𝑍𝑠𝑐
(4)
+ 𝛽7 𝑋𝑖𝑗𝑠𝑐 + 𝜆𝑠 + 𝜌𝑐

For each country, we then calculate the Gini coefficient (𝜌𝑐𝑑𝑖𝑟𝑒𝑐𝑡 ) under the assumption of no integration into
GVCs:

𝑑𝑖𝑟𝑒𝑐𝑡
𝜌𝑐𝑑𝑖𝑟𝑒𝑐𝑡 = 𝑔𝑖𝑛𝑖(𝑤
̂ 𝑖𝑗𝑠𝑐 ) (5)

We describe the direct contribution of GVC participation to wage inequality (𝐸 𝑑𝑖𝑟𝑒𝑐𝑡 ) as the difference between
the Gini coefficients of wages calculated in the baseline scenario and in the scenario of no GVC participation:

𝐸 𝑑𝑖𝑟𝑒𝑐𝑡 = 𝜌𝑐𝑏𝑎𝑠𝑒 − 𝜌𝑐𝑑𝑖𝑟𝑒𝑐𝑡 (6)

14
This model is equivalent to equation (3) in the main body of the paper. However, for simplicity reasons the expression
𝐵
𝐺𝑉𝐶𝑠𝑐 + 𝐺𝑉𝐶𝑠𝑐 𝐹
+ 𝐺𝑉𝐶𝑠𝑐𝐵
∗ 𝑂𝑈𝑇𝑠𝑐 + 𝐺𝑉𝐶𝑠𝑐 𝐹
∗ 𝑂𝑈𝑇𝑠𝑐 is noted as 𝐺𝑠𝑐 .

26
Counterfactual RTI scenario
In a third step, we analyze how GVC participation indirectly contributes to wage inequality through its
relationship with workers’ RTI (𝐸 𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡 ). Specifically, we estimate the model of workers’ RTI and then calculate
𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡 15
̂ 𝑖𝑗𝑠𝑐
counterfactual worker-level RTI, assuming GVC participation values equal to zero (𝑅𝑇𝐼 ). Formally:

𝐵 𝐹 𝐵
𝑅𝑇𝐼𝑖𝑗𝑠𝑐 = 𝛽0 + 𝛽1 𝐺𝑉𝐶𝑠𝑐 + 𝛽2 𝐺𝑉𝐶𝑠𝑐 + 𝛽3 𝐺𝑉𝐶𝑠𝑐 ∗ 𝐺𝐷𝑃𝑐𝑃𝐶 + 𝛽4 𝐺𝑉𝐶𝑠𝑐
𝐹
∗ 𝐺𝐷𝑃𝑐𝑃𝐶 + 𝛽5 𝑍𝑠𝑐
(7)
+ 𝛽6 𝑋𝑖𝑗𝑠𝑐 + 𝜆𝑠 + 𝜖𝑖𝑗𝑠𝑐

𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡
̂ 𝑖𝑗𝑠𝑐
𝑅𝑇𝐼 = 𝛽0 + 𝛽1 ∗ 0 + 𝛽2 ∗ 0 + 𝛽3 ∗ 0 ∗ 𝐺𝐷𝑃𝑐𝑃𝐶 + 𝛽4 ∗ 0 ∗ 𝐺𝐷𝑃𝑐𝑃𝐶 + 𝛽5 𝑍𝑠𝑐 + 𝛽6 𝑋𝑖𝑗𝑠𝑐
(8)
+ 𝜆𝑠 + 𝜖𝑖𝑗𝑠𝑐

𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡 𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡
̂ 𝑖𝑗𝑠𝑐
We then use the estimated models from equation (1) to predict wages 𝑤
̂ 𝑖𝑗𝑠𝑐 conditional on 𝑅𝑇𝐼 .
To isolate the indirect contribution of GVC participation to wage inequality through RTI, we use the observed
values of GVC participation in the wage model:

𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡 𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡
̂ 𝑖𝑗𝑠𝑐 𝐵 𝐹 𝐵 𝐹
𝑤
̂ 𝑖𝑗𝑠𝑐 = 𝛽0 + 𝛽1 𝑅𝑇𝐼 + 𝛽2 𝐺𝑉𝐶𝑠𝑐 + 𝛽3 𝐺𝑉𝐶𝑠𝑐 + 𝛽4 𝐺𝑉𝐶𝑠𝑐 ∗ 𝑂𝑈𝑇𝑠𝑐 + 𝛽5 𝐺𝑉𝐶𝑠𝑐
(9)
∗ 𝑂𝑈𝑇𝑠𝑐 + 𝛽6 𝑍𝑠𝑐 + 𝛽7 𝑋𝑖𝑗𝑠𝑐 + 𝜆𝑠 + 𝜌𝑐

We describe the indirect contribution of GVCs participation to wage inequality (𝐸 𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡 ) as the difference
between the Gini coefficients of wages calculated in the baseline scenario (𝜌𝑐𝑏𝑎𝑠𝑒 ) and the Gini coefficients of
wages in the counterfactual RTI scenario (𝜌𝑐𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡 ).

𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡
𝜌𝑐𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡 = 𝑔𝑖𝑛𝑖(𝑤
̂ 𝑖𝑗𝑠𝑐 ) (10)

𝐸 𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡 = 𝜌𝑐𝑏𝑎𝑠𝑒 − 𝜌𝑐𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡 (11)

Total contribution of GVC participation

In a fourth step, we calculate the total contribution of GVC participation to wage inequality (𝐸 𝑡𝑜𝑡𝑎𝑙 ). We set the
GVC participation values to zero (as in the calculation of the direct contribution), and we use the counterfactual
𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡
̂ 𝑖𝑗𝑠𝑐
RTI conditional on zero GVC participation (𝑅𝑇𝐼 , as in the calculation of the indirect contribution) to
predict wages using the estimated coefficients in the models from equation (1).

𝑡𝑜𝑡𝑎𝑙 𝑖𝑛𝑑𝑖𝑟𝑒𝑐𝑡
̂ 𝑖𝑗𝑠𝑐
𝑤
̂ 𝑖𝑗𝑠𝑐 = 𝛽0 + 𝛽1 𝑅𝑇𝐼 + 𝛽2 ∗ 0 + 𝛽3 ∗ 0 + 𝛽4 ∗ 0 ∗ 𝑂𝑈𝑇𝑠𝑐 + 𝛽5 ∗ 0 ∗ 𝑂𝑈𝑇𝑠𝑐 + 𝛽6 𝑍𝑠𝑐
(12)
+ 𝛽7 𝑋𝑖𝑗𝑠𝑐 + 𝜆𝑠 + 𝜌𝑐

We define the total contribution of GVC participation to wage inequality (𝐸 𝑡𝑜𝑡𝑎𝑙 ) as the difference between the
Gini coefficient of wages in the baseline scenario (𝜌𝑐𝑏𝑎𝑠𝑒 ) and the Gini coefficient of wages in this last scenario
(𝜌𝑐𝑡𝑜𝑡𝑎𝑙 ).
𝑡𝑜𝑡𝑎𝑙
𝜌𝑐𝑡𝑜𝑡𝑎𝑙 = 𝑔𝑖𝑛𝑖(𝑤̂ 𝑖𝑗𝑠𝑐 ) (13)
𝐸 𝑡𝑜𝑡𝑎𝑙 𝑏𝑎𝑠𝑒
= 𝜌𝑐 − 𝜌𝑐𝑡𝑜𝑡𝑎𝑙 (14)

15
Equation (7) is equivalent to equation (2) in the main body of the paper.

27
Appendix B – Additional results
Table B1. The Correlates of Routine Task Intensity (RTI) at the Worker Level, in the pooled sample, and by broad sectors, standardized (backward and forward GVC)

Panel A: Pooled (1) (2) (3) (4) (5) (6)

All workers Non-offshorable Offshorable All workers Non- offshorable Offshorable
Backward Global Value Chain participation (GVCB) share in exports (std.) -0.000 -0.007 0.046**
(0.010) (0.010) (0.019)
GVCB share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.011 -0.013 0.015
(0.007) (0.008) (0.014)
Forward Global Value Chain participation (GVCF) share in exports (std.) 0.019* 0.013 0.039***
(0.011) (0.012) (0.015)
GVCF share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] 0.036 0.049 -0.038
(0.028) (0.031) (0.033)
Ln(GDP per capita) –mean(Ln(GDP per capita)) -0.016 -0.006 -0.075 -0.006 0.006 -0.072
(0.038) (0.039) (0.060) (0.036) (0.036) (0.059)
Observations 167,253 145,122 22,131 167,034 144,914 22,120
Panel B: Industry
Backward Global Value Chain participation (GVCB) share in exports (std.) 0.019 -0.011 0.077**
(0.024) (0.026) (0.030)
GVCB share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] 0.015 0.026 0.005
(0.030) (0.032) (0.043)
Forward Global Value Chain participation (GVCF) share in exports (std.) 0.029* 0.011 0.048**
(0.015) (0.018) (0.020)
GVCF share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] 0.024 0.029 0.009
(0.031) (0.034) (0.046)
Ln(GDP per capita) –mean(Ln(GDP per capita)) -0.112 -0.091 -0.364*** -0.089 -0.032 -0.334***
(0.070) (0.074) (0.110) (0.067) (0.075) (0.109)
Observations 38,949 28,816 10,133 38,917 28,790 10,127

28
 Panel C: Business services
Backward Global Value Chain participation (GVCB) share in exports (std.) -0.086*** -0.093*** -0.014
(0.018) (0.020) (0.034)
GVCB share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] 0.048** 0.058*** -0.054*
(0.019) (0.020) (0.031)
Forward Global Value Chain participation (GVCF) share in exports (std.) -0.021 -0.024 -0.001
(0.015) (0.016) (0.023)
GVCF share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] 0.101*** 0.121*** -0.052
(0.031) (0.033) (0.039)
Ln(GDP per capita) –mean(Ln(GDP per capita)) -0.065 -0.051 -0.136* -0.051 -0.038 -0.132*
(0.044) (0.045) (0.075) (0.044) (0.045) (0.075)
Observations 72,153 63,173 8,980 71,979 63,003 8,976
Panel D: Other services
Backward Global Value Chain participation (GVCB) share in exports (std.) 0.265*** 0.249*** 0.436***
(0.075) (0.076) (0.149)
GVCB share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.371*** -0.363*** -0.478*
(0.113) (0.114) (0.256)
Forward Global Value Chain participation (GVCF) share in exports (std.) 0.075*** 0.070*** 0.133***
(0.025) (0.026) (0.044)
GVCF share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.234** -0.235** -0.236
(0.104) (0.103) (0.224)
Ln(GDP per capita) –mean(Ln(GDP per capita)) -0.199*** -0.199*** -0.292** -0.130** -0.134* -0.176
(0.070) (0.073) (0.135) (0.066) (0.069) (0.128)
Observations 50,843 48,133 2,710 50,843 48,133 2,710
Note: ***p < 0.01, **p < 0.05, *p < 0.1. Standard errors in parentheses. Standardized weights are used that give each country equal weight. The standard errors are clustered at a sector × country level.
Measures for Computer Use, GVCB share and FDI/GDP are standardized. All regressions include controls for technology (computer use, computer use squared), FDI, skills, education, age, gender, sector
FE, and sector FE interacted with GDP per capita.
Source: Authors’ calculations based on Lewandowski et al. (2022) and PIAAC, STEP, CULS (tasks), and World Bank (GDP, taxonomy groups, government education spending), EORA data and Borin and
Mancini (2015, 2019) (GVC participation measures).

29
Table B2. Pooled regression of backward and forward and by wide sectors and occupational groups, standardized
(backward and forward GVC)
Panel A: Pooled (1) (3)
(2) (4)
All workers Middle-
High-skilled Low-skilled
skilled
occupations occupations
occupations
(ISCO 1-3) (ISCO 7-9)
(ISCO 4-5)
Backward Global Value Chain participation (GVCB) share
in exports (std.) 0.004 -0.031* -0.059** 0.064***
(0.019) (0.017) (0.025) (0.022)
GVCB share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] 0.017 -0.035 0.085** 0.023
(0.029) (0.026) (0.039) (0.030)
Forward Global Value Chain participation (GVCF) share
in exports (std.) 0.019* 0.019* 0.009 0.046***
(0.010) (0.011) (0.017) (0.011)
GVCF share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.060*** -0.074*** -0.042** -0.045***
(0.012) (0.014) (0.016) (0.013)
Ln(GDP per capita) –mean(Ln(GDP per capita)) 0.033 0.011 0.013 0.107**
(0.038) (0.037) (0.046) (0.050)
Observations 167,034 68,439 52,895 45,700
Panel B: Industry
Backward Global Value Chain participation (GVCB) share
in exports (std.) 0.027 -0.051** 0.038 0.056**
(0.024) (0.020) (0.036) (0.024)
GVCB share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] 0.004 0.066** -0.051 0.003
(0.032) (0.031) (0.044) (0.038)
Forward Global Value Chain participation (GVCF) share in
exports (std.) 0.030** 0.017 -0.026 0.051***
(0.015) (0.018) (0.032) (0.016)
GVCF share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.043*** -0.006 -0.011 -0.060***
(0.017) (0.021) (0.034) (0.018)
Ln(GDP per capita) –mean(Ln(GDP per capita)) -0.096 -0.109 -0.237** 0.016
(0.066) (0.074) (0.099) (0.060)
Observations 38,917 11,245 4,208 23,464
Panel C: Business services
Backward Global Value Chain participation (GVCB) share
in exports (std.) -0.055** -0.037 -0.098** 0.030
(0.024) (0.028) (0.044) (0.032)
GVCB share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] 0.063* -0.070** 0.101* 0.124***
(0.037) (0.035) (0.053) (0.043)
Forward Global Value Chain participation (GVCF) share in
exports (std.) -0.015 0.010 -0.026 0.021
(0.016) (0.014) (0.020) (0.023)
GVCF share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.046*** -0.089*** -0.029 0.006
(0.017) (0.019) (0.018) (0.025)
Ln(GDP per capita) –mean(Ln(GDP per capita)) -0.027 -0.008 -0.064 -0.054
(0.049) (0.050) (0.059) (0.067)
Observations 71,979 24,754 32,362 14,863

30
 Panel D: Other services
Backward Global Value Chain participation (GVCB) share
in exports (std.) 0.220*** 0.058 0.251** 0.640***
(0.079) (0.085) (0.100) (0.127)
GVCB share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.329*** -0.242** -0.342*** -0.451***
(0.114) (0.123) (0.123) (0.145)
Forward Global Value Chain participation (GVCF) share in
exports (std.) 0.029 0.030 0.038 0.073
(0.023) (0.027) (0.031) (0.047)
GVCF share (std.) * [Ln(GDP pc) –mean(Ln(GDP pc)] -0.073** -0.078** -0.082** 0.049
(0.032) (0.034) (0.042) (0.055)
Ln(GDP per capita) –mean(Ln(GDP per capita)) -0.210*** -0.225*** -0.084 -0.024
(0.076) (0.079) (0.108) (0.113)
Observations 50,843 31,609 15,051 4,183
Note: ***p < 0.01, **p < 0.05, *p < 0.1. Standard errors in parentheses. Standardized weights are used that give each country equal
weight. The standard errors are clustered at a sector × country level. Measures for GVCB share and GVCF share are standardized. All
regressions include controls for technology (computer use, computer use squared), FDI, skills, education, age, gender, sector FE, and
sector FE interacted with GDP per capita.
Source: Authors’ calculations based on Lewandowski et al. (2022) and PIAAC, STEP, CULS (tasks), and World Bank (GDP), EORA data
and Borin and Mancini (2015, 2019) (GVC participation measures).

Figure B1. The contribution of GVC participation to wage inequality, residual term.

Source: Authors’ calculations based on Lewandowski et al. (2022) and PIAAC, STEP, CULS (tasks), EORA data and Borin and Mancini
(2015, 2019) (GVC participation measures).

31