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Globalization and the Labor Market

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  • MartÌn Rama

Abstract

Does globalization affect labor market outcomes? Can labor market policies mitigate or offset the effects? Would these policies have important side effects on efficiency? This article addresses these questions through an analytical survey of the literature, including several studies under preparation. Some of the studies use new cross-country databases of wages and other labor market indicators. Although all the answers should be considered tentative, some patterns emerge. Different aspects of globalization have different consequences. In the short run wages fall with openness to trade and rise with foreign direct investment. But after a few years the effect of trade on wages becomes positive. Foreign direct investment also increases (substantially) the returns to education. Social protection programs are effective in reducing inequality. Minimum wages, public sector employment, and core labor standards are not. Between these two extremes, collective bargaining works mainly for the middle class. Social protection programs do not adversely affect efficiency, but high public sector employment and trade union membership are associated with weaker performance in the context of adjustment. Copyright 2003, Oxford University Press.

Suggested Citation

  • MartÌn Rama, 2003. "Globalization and the Labor Market," The World Bank Research Observer, World Bank, vol. 18(2), pages 159-186.
    • Handle: RePEc:oup:wbrobs:v:18:y:2003:i:2:p:159-186
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    Citations

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    Cited by:

    1. Halit Yanikkaya, 2013. "Is trade liberalization a solution to the unemployment problem?," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 12(1), pages 57-85, April.
    2. José Alemán, 2008. "Labor Market Deregulation and Industrial Conflict in New Democracies: A Cross‐National Analysis," Political Studies, Political Studies Association, vol. 56(4), pages 830-856, December.
    3. Novella Bottini & Michael Gasiorek, 2009. "Trade and Job Reallocation: Evidence for Morocco," LIUC Papers in Economics 224, Cattaneo University (LIUC).
    4. repec:wsr:fiwspe:y:2012:i:003 is not listed on IDEAS
    5. Petia Topalova, 2007. "Trade Liberalization, Poverty and Inequality: Evidence from Indian Districts," NBER Chapters, in: Globalization and Poverty, pages 291-336, National Bureau of Economic Research, Inc.
    6. Wang, Danny T. & Gu, Flora F. & Tse, David K. & Yim, Chi Kin (Bennett), 2013. "When does FDI matter? The roles of local institutions and ethnic origins of FDI," International Business Review, Elsevier, vol. 22(2), pages 450-465.
    7. repec:dau:papers:123456789/3202 is not listed on IDEAS
    8. Mari Kangasniemi & Jukka Pirttilä, 2013. "Trade unions in the south and co-operation between unions in the South and in the North: A survey of the economics literature," Working Papers 285, Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE.
    9. Petia Topalova, 2010. "Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 1-41, October.
    10. Pierre, Gaelle & Scarpetta, Stefano, 2004. "Employment regulations through the eyes of employers - do they matter and how do firms respond to them?," Policy Research Working Paper Series 3463, The World Bank.
    11. Bernard Hoekman & Alan L. Winters, 2005. "Trade and Employment: Stylized Facts and Research Findings," Working Papers 7, United Nations, Department of Economics and Social Affairs.
    12. Matthias Busse & Carsten Hefeker, 2009. "Trade, labour market regulations and growth," Applied Economics Letters, Taylor & Francis Journals, vol. 16(8), pages 809-812.
    13. Pillai, Rajasekharan, 2010. "Labour Market Structure: A Brief Literature Survey," MPRA Paper 27479, University Library of Munich, Germany.
    14. Goyal, Ashima, 2005. "New technology and labour Markets: Entrants, outsourcing and matching," MPRA Paper 24620, University Library of Munich, Germany.
    15. Alexandre SIMONS, 2014. "Delocation, home wages and welfare," LIDAM Discussion Papers IRES 2014007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    16. Kevin A. Hassett & Aparna Mathur, 2015. "A spatial model of corporate tax incidence," Applied Economics, Taylor & Francis Journals, vol. 47(13), pages 1350-1365, March.
    17. Kim, Il-Ho & Muntaner, Carles & Vahid Shahidi, Faraz & Vives, Alejandra & Vanroelen, Christophe & Benach, Joan, 2012. "Welfare states, flexible employment, and health: A critical review," Health Policy, Elsevier, vol. 104(2), pages 99-127.

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