Abstract
I address a complex of globalization issues: the effect of globalization on the skill premium; on unemployment; on the ability of national governments to conduct independent social policies; the relative importance of globalization and exogenous technical change. A large empirical literature concludes that trade has played a relatively minor role, relative to skill-biased technical change, in the rise of the skill premium. This paper replaces the Stolper–Samuelson theorem's focus on inter-sectoral with attention to intra-sectoral relations between inputs. Specifically, I assume out-sourcing and unskilled labor are highly substitutable, equipment and skilled labor are complementary, production methods are flexible, and that the country undertaking out-sourcing has a significantly different structure from that providing it. Globalization then offers a simple and immediate possible explanation for prominent stylized facts regarding the skill premium and the presence of skill-biased technical change.
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