GEP Research Paper 01/05
Fragmentation, Globalisation and Labour Markets
Michael Burda and Barbara Dluhosch
This paper was subsequently published in Trade, Investment and Labour: Proceedings of IEA Conference on Globalisation and Labour Markets, D. Greenaway, R. Upward and K. Wakelin (eds.) Palgrave (2002).
Abstract
Fragmentation of the value-added-chain is modeled as the reaction of monopolistically competitive firms to the removal of barriers to trade and factor mobility in an integrated trading environment. Since fragmentation requires high-skilled labor, this form of globalization can induce labor market effects similar to those caused by skill-biased technical change. In the short run, it is likely that fragmentation will be accompanied by an increase in high and low-skilled service employment as well as in the skilled wage premia, as observed in OECD countries. These implications can be reversed, however, as new firms enter the market.
Issued in May 2001.
This paper is available in PDF format .