Globalization, Jobs, and Welfare: The Roles of Social Protection and Redistribution

57 Pages Posted: 5 Feb 2015

See all articles by Priya Ranjan

Priya Ranjan

University of California, Irvine - Department of Economics

Date Written: January 31, 2015

Abstract

This paper studies the welfare and policy implications of globalization when risk averse workers face the risk of unemployment. If the jobs performed by domestic workers can be easily substituted by imports, then globalization reduces wages and increases unemployment. In this situation, in the absence of any government intervention globalization not only reduces the welfare of workers but could reduce social welfare as well. Both unemployment benefits and severance payments can protect workers against labor income risk, but the latter enhances welfare more if job destruction is the source of unemployment. When optimal redistribution and social protection policies are in place, globalization necessarily improves social welfare.

Keywords: offshoring, unemployment, endogenous job destruction, severance payments, unemployment benefits

JEL Classification: F160, F660, F680

Suggested Citation

Ranjan, Priya, Globalization, Jobs, and Welfare: The Roles of Social Protection and Redistribution (January 31, 2015). CESifo Working Paper Series No. 5191. Available at SSRN: https://ssrn.com/abstract=2560751

Priya Ranjan (Contact Author)

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

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