Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/85959 
Year of Publication: 
2002
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 02-088/2
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
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.
Subjects: 
fragmentation
equipment utilization
out-sourcing
input substitution
input complementarity.
JEL: 
F02
Document Type: 
Working Paper

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