Working Paper: NBER ID: w10000
Authors: Richard B. Freeman
Abstract: The rules governing trade and capital flows have been at the center of controversy as globalization has proceeded. One reason is the belief that trade and capital flows have massive effects on the labor market -- either positive, per the claims of international financial institutions and free trade enthusiasts, or negative, per the ubiquitous protestors at WTO, IMF, and World Bank meetings demanding global labor standards. Comparing the claims made in this debate with the outcomes of trade agreements, this paper finds that the debate has exaggerated the effects of trade on economies and the labor market. Changes in trade policy have had modest impacts on labour market. Other aspects of globalization -- immigration, capital flows, and technology transfer -- have greater impacts, with volatile capital flows creating great risk for the well-being of workers. As for labor standards, global standards do not threaten the comparative advantage of developing countries nor do poor labor standards create a race to the bottom'.
Keywords: No keywords provided
JEL Codes: J0; J5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| changes in trade policy (F13) | modest impacts on labor markets (F66) |
| immigration (F22) | labor market dynamics (J29) |
| capital flows (F32) | labor market outcomes (J48) |
| technology transfer (O33) | labor market outcomes (J48) |
| trade (F19) | economic growth (O49) |
| capital mobility (F20) | risks to developing countries (F63) |
| trade (F19) | adverse effects on wages for low-skill workers (F66) |