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The two-way interaction between globalization and labour market policies


  • Andrew Downes
  • Rafael Gomez
  • Morley Gunderson


Labour market and social policies both affect and are affected by the process of trade liberalization and globalization. This two-way interaction and the feedback effects are the focus of this paper. The analysis is mainly conceptual—but examples are illustrated throughout, based mainly in the context of labour markets in North America, Latin America and the Caribbean basin. Attention is paid to outlining the mechanisms whereby globalization and trade liberalization affect labour market and social policy initiatives, and the extent to which these pressures will lead to a harmonization of legislative and policy initiatives, and if that harmonization will necessarily be downward to the lowest common denominator. The paper concludes that: (1) the pressures will lead towards policy harmonization; (2) the harmonization generally will be downwards; (3) such harmonization is not always negative as generally perceived; (4) efficient regulatory and social policy initiatives will survive and indeed expand, with the “rent-protecting” ones under most pressure to dissipate; and (5) pure distributional or equity-oriented initiatives that have no positive feedback effect on efficiency, unfortunately, will also be under jeopardy to dissipate, and this is a serious policy concern. Alternatives for addressing this concern are discussed, as are their associated problems.

Suggested Citation

  • Andrew Downes & Rafael Gomez & Morley Gunderson, 2004. "The two-way interaction between globalization and labour market policies," Oxford Development Studies, Taylor & Francis Journals, vol. 32(1), pages 135-152.
  • Handle: RePEc:taf:oxdevs:v:32:y:2004:i:1:p:135-152
    DOI: 10.1080/1360081042000184165

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    References listed on IDEAS

    1. Rebecca M. Blank, 1994. "Introduction to "Social Protection versus Economic Flexibility: Is There a Trade-Off?"," NBER Chapters,in: Social Protection versus Economic Flexibility: Is There a Trade-Off?, pages 1-20 National Bureau of Economic Research, Inc.
    2. Rebecca M. Blank, 1994. "Social Protection versus Economic Flexibility: Is There a Trade-Off?," NBER Books, National Bureau of Economic Research, Inc, number blan94-1, July.
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    Cited by:

    1. Chai, D.H., 2010. "The Impact of Foreign Corporate Ownership on Downsizing and Labour Cost," Working Papers wp402, Centre for Business Research, University of Cambridge.

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