Abstract:
Analysis based on models of (i) matching, (ii) network externalities, (iii) trade fragmentation, and (iv) resource supply on technological progress, shows that longer-term trends set in motion, from new technology enabled global sourcing, improve equity. Firms in emerging markets gain more access; labour markets become more inclusive. Global sourcing has the potential to raise the mobility and market access of virtual labour to match that of capital, despite continuing restrictions on migration. It makes a wider menu of jobs available to labour categories that were earlier excluded because of their higher transaction costs of reaching markets. It improves labour’s exit options and therefore bargaining power. Trade fragmentation or splitting of the production chain across countries reverses earlier tendencies for trade to be confined to countries with similar industry structure. Further induced technological progress reduces wage inequalities within and across nations. Government policy initiatives and firms’ strategies to boost and utilize these trends are examined.
