Globalisation, technology and employment: looking back

Majumder, Rajarshi (2020): Globalisation, technology and employment: looking back.

Abstract

Globalisation has been the buzzword across the world for a major part of the last 40 years or so. Starting at a creeping pace in the mid-1980s, it has advanced at unprecedented pace over the last two and half decades. Trade barriers have come down, linkages have been formed and strengthened, and a plethora of economic activities have become intertwined, across countries and continents giving rise to the global value chain. Technological advancements across the globe has reinforced globalisation. However, after a quarter of century, voices are being raised regarding inequalities and instabilities in the labour market. Against this backdrop, this paper attempts to explore global trends in the world of work and also examine how globalisation and technological changes have affected the labour market in different sets of countries over the last 25 years or so. Using Labour Market data from ILO, it has been shown that globalisation has been associated with a phenomenal rise in GDP coupled with low population growth & rising PCI in major parts of the globe in recent times. But this striking economic boom has not been reflected in the labour market, especially in the low and middle income countries, which now have Unemployment rates higher than what was in 1990, even though LFPR itself has declined. There has happened large scale adoption of labour saving technology across the globe, as a result of which expansion & improvement of employment has not been up to the expected level. Instead of industrialisation, share of industry in GDP has declined in the developing world accompanied by a tremendous increase in the share of services in GDP – a sure sign of Missing middle phase of economic transformation. Globalisation indices used here are found to be significantly negatively associated with employment growth rates all throughout. Magnitude of the negative relation is stronger for middle income countries than the high income countries – indicating that the post-globalisation shock to labour market has been higher in developing countries rather than in developed countries. It is time to pay heed to saner academic voices and give a boost to domestic demand through larger government expenditure, rather than stick to a neo-liberal supply side fetish in the developing economies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Employment; Globalisation; Technology; Capital-Labour Ratio; Sectoral GDP; Employment Elasticity; Financial Integration
• Subjects: F - International Economics > F6 - Economic Impacts of Globalization > F60 - General; F - International Economics > F6 - Economic Impacts of Globalization > F62 - Macroeconomic Impacts; F - International Economics > F6 - Economic Impacts of Globalization > F63 - Economic Development; F - International Economics > F6 - Economic Impacts of Globalization > F66 - Labor; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J21 - Labor Force and Employment, Size, and Structure; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization ; Manufacturing and Service Industries ; Choice of Technology; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives

References

Aitken, B. and A. Harrison (1999) – ‘Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela’, American Economic Review, Vol. 89.

Basu, S. and D.N. Weil (1998) – ‘Appropriate Technology and Growth’, Quarterly Journal of Economics, Vol. 113, pp.1025-1054.

Coe D.T., E. Helpman and A.W. Hoffmaister, (1997) – ‘North-South R&D Spillovers’, Economic Journal, Vol. 107, pp.134-149

Dreher, Axel (2006) – ‘Does Globalization Affect Growth? Evidence from a new Index of Globalization’, Applied Economics, Vol. 38, No. 10, pp. 1091-1110.

Dreher, Axel, Noel Gaston and Pim Martens (2008) – Measuring Globalization – Gauging its Consequences, Springer, New York.

Friedman, Thomas (1999) The Lexus and the Olive Tree

Gros, J.B. (2004) – ‘Labour Demand of Developing Countries in a Decade of Globalization: A Statistical Insight’, in Lee, E. and M. Vivarelli (eds.), Understanding Globalization, Employment and Poverty Reduction, Palgrave Macmillan, New York.

Grossman, G.M. and E. Helpman (1991) - Innovation and Growth in the Global Economy, MIT Press, Cambridge (Mass.).

Gygli, Savina, Florian Haelg, Niklas Potrafke and Jan-Egbert Sturm (2019): The KOF Globalisation Index – Revisited, Review of International Organizations, 14(3), 543-574 https://doi.org/10.1007/s11558-019-09344-2.

Haddad, M. and A. Harrison (1993) – ‘Are there Positive Spillovers from Direct Foreign Investment’, Journal of Development Economics, Vol. 42, pp.51-74

ILO (2004) – A Fair Globalization: Creating Opportunities for All, Report of the World Commission on the Social Dimension of Globalization, ILO, Geneva.

Kathuria, V. (2001) – ‘Foreign Firms and Technology Transfer Knowledge Spillovers to Indian Manufacturing Firms: A Stochastic Frontier Analysis’, Applied Economics, Vol. 33

Kelvin, William T. (1883) - Lecture on “Electrical Units of Measurement” (3 May 1883), Popular Lectures, Vol-I, p73, https://archive.org/stream/popularlecturesa01kelvuoft#page/73/mode/2up

Lall S. (2004) – ‘The Employment Impact of Globalization in Developing Countries’, in Lee, E. and M. Vivarelli (eds.), Understanding Globalization, Employment and Poverty Reduction, Palgrave Macmillan, New York, pp. 73-101.

Lee, E and M. Vivarelli (2006) – ‘The Social Impact of Globalisation in the Developing Countries’, IZA Discussion Paper Series, DP NO. 1925, January, 2006.

Lee, E and M. Vivarelli (eds.) (2004) - Understanding Globalization, Employment and Poverty Reduction, Palgrave Macmillan, New York.

Mathur, Ashok and Sunil Mishra (2007) - Wages and Employment in the Indian Industrial Sector: Theory and Evidence, Indian Journal of Labour Economics, Vol. 50, No. 1, pp83-110

Milanovic, B. (2003) – ‘The Two Faces Of Globalization: Against Globalization as We Know it, Development and Comp Systems, Economics Working Paper Archive at WUSTL No. 0303007.

Mukherjee, D. and R. Majumder (2008) - “State Intervention and Labour Market in India: Issues and Options”, (jointly with Rajarshi Majumder), in K.K. Bagchi (ed) State, Labour and Development: An Indian Perspective, Serials Publications, New Delhi, 2008

Ohlin, B. (1933) – Interregional and International Trade, Harvard University Press, Cambridge.

Ohlin, B. and Eli Heckscher (1991) - Heckscher-Ohlin Trade Theory, The MIT Press, Cambridge.

Patnaik, Pravat (2017) Economy Plunging Headlong into Recession, Macroscan, Aug 16th 2017, [http://www.macroscan.org/cur/aug17/pdf/Economy_Plunging.pdf accessed on 29-10-2019]

Rodrik, D. (2000) – Comments on ‘Trade, Growth and Poverty’ by D.Dollar and A.Kraay, mimeo Harvard University, Cambridge (Mass.).

Sen, Sunanda (2018) – Whither Indian Economy?, Macroscan, Sept 24th 2018, [http://www.macroscan.org/cur/sep18/pdf/Indian_Economy.pdf accessed on 29-10-2019]

Stiglitz, E.J.(2002).Globalisation and its discontents. Great Britain: Penguin Press.

Stiglitz. Joseph E. (2016) - How the Democrats Can Fix Themselves, Vanity Fair, Nov 17, 2016 [https://www.vanityfair.com/news/2016/11/how-the-democrats-can-fix-themselves accessed on 12-10-2019]

Stolper, W.F. and P.A. Samuelson (1941) – ‘Protection and Real Wages’, Review of Economic Studies, Vol. 9, pp.58-73.

Vivarelli, M. (2004) – ‘Globalization, Skills and Within Country Income Inequality in Developing Countries’, in Lee, E. and M. Vivarelli (eds.), Understanding Globalization, Employment and Poverty Reduction, Palgrave Macmillan, New York, pp. 211-243.

Wood, Adrian (1994) - North-South Trade, Employment and Inequality. Changing Fortunes in a Skill-Driven World, Clarendon Press, Oxford.

Wood, Adrian (1998) – ‘Globalisation and the Rise in Labour Market Inequalities’, The Economic Journal, Vol. 108, No. 450

World Bank (2002) - Globalization, Growth, and Poverty, World Bank Policy Research Report No. 23591, [available from http://documents.worldbank.org/curated/en/ 954071468778196576/pdf/multi0page.pdf]