Economic Insecurity and the Globalization of Production

43 Pages Posted: 30 Nov 2002 Last revised: 12 Jul 2014

See all articles by Kenneth Scheve

Kenneth Scheve

Stanford University

Matthew J. Slaughter

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2002


A common claim in debates about globalization is that economic integration increases worker insecurity. Although this idea is central to both political and academic debates about international economic integration, the theoretical basis of the claim is often not clear. There is also no empirical research that has directly tested the relationship. In this paper, we argue that economic insecurity among workers may be related to riskier employment and/or wage outcomes, and that foreign direct investment may be a key factor contributing to this increased risk by making labor demands more elastic. We present new empirical evidence, based on the analysis of panel data from Great Britain collected from 1991-1999, that FDI activity in the industries in which individuals work is positively correlated with individual perceptions of economic insecurity. This relationship holds in yearly cross-sections, in a panel accounting for individual-specific effects, and in a dynamic panel model also accounting for individual-specific effects.

Suggested Citation

Scheve, Kenneth F. and Slaughter, Matthew J., Economic Insecurity and the Globalization of Production (November 2002). NBER Working Paper No. w9339. Available at SSRN:

Kenneth F. Scheve

Stanford University ( email )

Stanford, CA 94305
United States

Matthew J. Slaughter (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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