ABSTRACT
Everyday experience suggests that globalisation, as reflected in the increasing availability of cheap imports from low-wage countries, could lie at the heart of the recent adverse developments in European and North American markets for relatively unskilled workers. This has led to the popular impression that trade liberalisation and increasing flows of foreign direct investment to developing countries, together with improvements in transport and communications, have resulted in products formerly produced by unskilled workers in industrial countries being increasingly purchased from low-wage countries. Economic theory supports these notions. Economists strongly believe that trade and investment liberalisation bring overall gains to an economy. However, the theory demonstrates that there are distributional consequences of globalisation, such that in industrial countries unskilled workers may suffer temporary or permanent losses of employment and income. But globalisation is only one of a range of factors and shocks that can adversely affect the situation of less-skilled workers in industrial countries.
