Question

Explain how globalization has affected the United States from the 1970s on.

Answer 1

Globalization has attracted a great deal of academic attention in part because it has coincided with dramatic changes in the structure of wages in advanced countries. (1) Since the late 1970s, the real wages of more-skilled workers in the United States have risen steadily, while those of less-skilled workers have stagnated or even fallen. (2) More trade with low-wage countries is one possible factor behind rising wage inequality. What complicates identifying the impact of trade on wages is that other profound shocks to labor markets have occurred at the same time. The advent of information technology, for instance, appears to have increased the demand for skilled labor and allowed firms to eliminate many jobs performed by the less skilled. (3) In the absence of clear evidence linking trade and wages, many have attributed the rise in the skilled wage gap to technological change.

Naturally, we would like to have an empirical framework that allows us to estimate the impact of trade and technology shocks on labor demand and wages at the same time. This is particularly important where international trade takes the form of foreign outsourcing, since moving less-skill intensive production activities abroad makes production at home more skill-intensive. This may be observationally equivalent to changes in technology that are biased in favor of skilled labor. A large fraction of the growth in world trade since the 1970s has taken the form of trade in intermediate inputs, in general, and foreign outsourcing, in particular. (4) To cite some well-known examples, Nike outsources production of its footwear to firms in Asia, and Dell outsources production of the components and peripheral devices that make up its personal computers to suppliers around the world.

Answer 2

Since the United States is attached to the globe, gravity has helped it stay stuck to it since the 1970s onward. Because of this, I'd say globalization has been a good thing.