Trade, Offshoring, and the Invisible Handshake / Bilgehan Karabay, John McLaren.

Format:

Book

Author/Creator:

Karabay, Bilgehan.

Contributor:

National Bureau of Economic Research.

McLaren, John.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15048.

NBER working paper series no. w15048

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

We study the effect of globalization on the volatility of wages and worker welfare in a model in which risk is allocated through long-run employment relationships (the 'invisible handshake'). Globalization can take two forms: International integration of commodity markets (i.e., free trade) and international integration of factor markets (i.e., offshoring). In a two-country, two-good, two-factor model we show that free trade and offshoring have opposite effects on rich-country workers. Free trade hurts rich-country workers, while reducing the volatility of their wages; by contrast, offshoring benefits them, while raising the volatility of their wages. We thus formalize, but also sharply circumscribe, a common critique of globalization.

Notes:

Print version record

June 2009.