The effect of trade in intermediate inputs volatility on employment in the Australian manufacturing industries

Empirical studies of the effects of trade in intermediate inputs on employment are typically based on a simple labour demand or production function with limited consideration of labour composition and in particular, the vulnerability of trade network relationships. In contrast, we simultaneously assess the impacts of these factors on shifts in employment using a dynamic labour demand framework. Our assessments incorporate a novel measure of workforce composition and trade network relationships volatility. Using Australian trade and industry data for the period between 1995 and 2008, our findings indicate that trade network volatility significantly impacted employment and labour composition in the Australian manufacturing industries. The significance of trade network volatility hence suggests that the evaluation of employment effects and the formulation of labour market policy should be differentiated by trade network structure and relationship dynamics.