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Globalization, Globalisation

Author

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  • Wilfred J. Ethier

    (Department of Economics, Faculty of Economics, University of Pennsylvania)

Abstract

This paper addresses a complex of globalization issues: the effect of globalization on the skill premium; the effect of globalization on unemployment; the relative importance of globalization and exogenous technical change; the effect of globalization on the ability of national governments to conduct independent social policies. Thinking about these topics has been dominated by a large empirical literature concluding that trade has played a relatively minor role in the rise of the skill premium, while exogenous skill-biased technical change has played a major role. This paper replaces the focus on inter-sectoral substitution at the heart of the Stolper-Samuelson theorem with attention to intra-sectoral relations between inputs. Specifically, I assume that out-sourcing and unskilled labor are highIy substitutable and that equipment and skilIed labor are complementary , that production methods are flexible, and that the country undertaking out-sourcing has a significantIy different structure from that providing it. Globalization then offers a simple and immediate possible explanation for the prominent stylized facts regarding the emergence of the skill premium and for the presence of skill-biased technical change. Trade vs. technology remains as an empirical issue, though, because exogenous neutral technological change offers an alter-native possible explanation.

Suggested Citation

  • Wilfred J. Ethier, 2002. "Globalization, Globalisation," Tinbergen Institute Discussion Papers 02-088/2, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20020088
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    File URL: https://papers.tinbergen.nl/02088.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    fragmentation; equipment utilization; out-sourcing; input substitution; input complementarity.;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration

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