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Globalization and Trilateral Labor Markets

Evidence and Implications

By Robert Z. Lawrence, Niels Thygesen, and Yutaka Kosai

Large and populous states are becoming major participants in a truly globalized economy. The surge in trade with, and foreign investment in, new partners has coincided with growing tensions in labor markets in Europe, North America, and Japan—in particular a deterioration of the relative position of less-skilled workers in Europe and North America. The main task of this volume—undertaken in chapters on the United States, Japan, and Europe—is to discuss the evidence of a link from globalization to growing tensions in Trilateral labor markets.

The authors conclude that trade with developing countries has played only a small role in these labor market tensions. Looking ahead, they construct–for the United States and Japan—extreme scenarios in which all of manufacturing industry which uses less-skilled labor above a certain threshold in its total employment is wiped out by new competitors. Even then, the growth of export opportunities and reasonable assumptions about substitution between different categories of labor prevent disastrous consequences for the weaker part of the labor force.

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