Globalisation

2711 mots 11 pages
Globalisation and Inequality: Some Remarks by Dr. Carlos F. Liard-Muriente, Ph.D., Western New England College, Department of Economics, 1215 Wilbraham Rd., Springfield, MA 01119 Abstract The debate about inequality has concentrated on trade and/or technology as potential explanations. This paper argues that openness or globalisation in general, instead of the narrow definition of trade, is an important component missing from the discussion about inequality trends. To be specific, openness allows firms to increase their fallback position by presenting a credible threat of relocation. Firms do not have to actually relocate; they just have to present a credible threat to undermine worker’s welfare. This area of research, currently underdeveloped, could potentially improve our discussion about inequality. 1. Introduction The widening in the earnings gap has been the source of extensive and intensive debate. Initially trade was thought to be the prime mover behind the problem. However, many studies showed that trade had a relative small impact on inequality1. With researchers arguing that the impact of trade on inequality was minimum, technology (the rise of computers in particular) was then presented as a more plausible explanation. Many studies produced evidence indicating this relationship (Bound and Johnson, 1992; Levy and Murnane, 1992; Katz and Murphy, 1992; Juhn, Murphy and Pierce, 1993; Jorgenson, 2001). As Katz and Autor (1999) explain, the rise in inequality during the 1980s seems to follow the arrival of computers. Furthermore, high-skilled workers are more likely to use computers on the job. Thus, there seems to be a relationship between computers and human capital (Krueger 1993). In other words, it could be argued that, during the 1980s, the relative increase in demand for high-skilled workers caused the increase in earnings inequality (Johnson, 1997). Thus, the Skill Biased Technical Change (SBTC) hypothesis emerged. However, as DiNardo and Pischke

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