Across the world, there appears to be significant opposition to policies aimed at further liberalization of international trade, immigration, and foreign direct investment (FDI). A large number of political events in recent years suggest a marked turn away from liberalization, and many prominent observers have raised alarms about this "globalization backlash." There is a growing body of research examining what political-economy forces underlie this backlash.
Although this research has identified some of the key sources of political conflict over international economic liberalization, a number of central questions remain unanswered. Most importantly, debates about globalization frequently involve claims about the impact of integration on individual economic insecurity. The argument most often made is that globalization increases insecurity. Although this claim is central to both political and academic debates about international economic integration, there is no empirical research that has directly tested the relationship. In fact, in many accounts, it is not even clear on what theoretical grounds the claim is made. The primary objective of this research project is to evaluate theoretically and empirically whether and how globalization increases individual economic insecurity in advanced industrial democracies. The Principal Investigators propose to develop a theoretical argument that FDI by multinational enterprises (MNEs) is the critical mechanism through which globalization generates economic insecurity in advanced economies and to directly test this connection using individual-level survey data. No existing research has made a direct empirical test of the hypothesized relationship between the multinationalization of production and the economic insecurity of individual workers.
The Principal Investigators contend that rising economic insecurity among workers may relate to deteriorating employment and/or wage interactions with their employers. These ideas can be formalized in standard frameworks of labor economics in terms of either rising elasticities of demand for labor and/or declining profit/risk- sharing opportunities. Greater cross-border flows of FDI by MNEs are key forces that are likely both to raise elasticities and lower profit/risk sharing. Our research will further develop these theoretical connections between rising MNE activity and economic insecurity.
Our overall empirical approach will be to examine how individual self-assessments of economic insecurity correlate with the role of FDI and MNEs in the industries and/or regions in which these individuals reside and work. Initially, the Principal Investigators will study Great Britain by combining two data sets: the British Household Panel Survey (BHPS) and the Annual Respondents Database (ARD). The BHPS is a nationally-representative panel of more than 5,000 households and over 9,000 individuals surveyed annually from 1991 to the present. It records detailed information about each respondent's employment, wages, and perceptions of economic security. The ARD tracks U.K. manufacturing activity and, importantly, the nationality of ownership for each firm. By industry and region, the Principal Investigators can then calculate the share of manufacturing activity accounted for by foreign-owned firms, British-headquartered MNEs, and purely domestic firms. With similar data for non-manufacturing activity from other data files of the same form as the ARD, the Principal Investigators can then merge MNE information into the BHPS and thereby see how individual responses relate to MNE activity. Together these data will allow us to evaluate the extent and way in which FDI activity affects labor market outcomes and perceptions of economic security across individuals in the UK and whether these relationships have changed over the last decade. The Principal Investigators will extend their UK study to at least 14 other advanced economies using similar datasets. The comparative and temporal dimension of the project is critical for evaluating how the relationship between globalization and insecurity is affected by variation in the extent of FDI activity, economic performance, labor market institutions, and characteristics of welfare states.
