Ziyafat Habibova

Type of the article: Research Article

Abstract
The growing dominance of services in global trade raises the question of whether employment structure and labor market participation shape countries’ ability to compete in international service markets, particularly in financial and insurance services. This study examines how the service-sector employment structure and labor market participation affect trade in services, with particular attention to insurance and financial services exports, across countries at different income levels. Using an unbalanced panel of 159 countries from 2010 to 2023, the study analyzes two dimensions of service trade: total trade in services as a share of GDP and insurance and financial services as a share of service exports. The results reveal that total service exports increase with higher labor participation (β = 0.0157, p < 0.001), but decrease as the service employment share rises (β = –0.0048, p < 0.05). GDP per capita and FDI are positive drivers (β = 0.217; β = 0.013), whereas the rule of law is negatively associated (β = –0.211). In insurance and financial services, labor participation reduces specialization (β = –0.0059, p < 0.001), and service employment is only weakly positive (β = 0.0027, p ≈ 0.07). Income-group results show heterogeneity: service employment is strongly negative and FDI positive in low and lower-middle income economies (x1 β = –0.015/–0.019; x5 up to β = 0.039), whereas service employment becomes positive in high-income countries (β = 0.022, p < 0.05); here, higher income and participation reduce the relative weight of financial services (β = –0.212; β = –0.0109).