A common claim in debates about globalization is that economic integration increases worker insecurity. Although this idea is central to both political and academic debates about international economic integration, the theoretical basis of the claim is often not clear. There is also no empirical research that has directly tested the relationship. In this paper, we argue that economic insecurity among workers may be related to riskier employment and/or wage outcomes, and that foreign direct investment may be a key factor contributing to this increased risk by making labor demands more elastic. We present new empirical evidence, based on the analysis of panel data from Great Britain collected from 1991-1999, that FDI activity in the industries in which individuals work is positively correlated with individual perceptions of economic insecurity. This relationship holds in yearly cross-sections, in a panel accounting for individual-specific effects, and in a dynamic panel model also accounting for individual-specific effects.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
9339.
Length: Date of creation: Nov 2002 Date of revision: Handle: RePEc:nbr:nberwo:9339
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Find related papers by JEL classification: F2 - International Economics - - International Factor Movements and International Business J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
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