AFRICA INTEGRATION INTO GLOBAL VALUE CHAINS AND THE RAMIFICATIONS FOR DOMESTIC LABOUR MARKETS

Abstract

This paper examines the implications of Africa's integration into global value chains (GVCs) and its impact on domestic labor markets. Using secondary data from 1990 to 2022 on unemployment, GVCs, secondary school enrollment, GDP growth, population growth, and foreign direct investment, the study panel quantile autoregressive distributed lag models to analyze short-term and long-term effects along with the Dumitrescu-Hurlin causality test was used to determine the aggregate level direction of causalityThe findings indicate that Africa's integration into GVCs reduces unemployment, with a more pronounced effect in the long run at the upper quantile. The causality test results show that unemployment drives GVCs in Africa, though this varies across countries. Based on these findings, the study recommends that Africa should embrace GVC integration and mitigate short-term unemployment disruptions by implementing social safety nets and unemployment benefits. Furthermore, the educational system should be strengthened to enhance school enrollment and vocational training programs, equipping the labor force with skills needed for GVC integration. Additionally, foreign direct investment should be promoted through investor-friendly policies, infrastructure improvement, political stability, and support for local industries to become competitive in GVCs, thereby maximizing the benefits of integration.