Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2018:31: Globalization and the Jobs Ladder

Carl Davidson (), Fredrik Heyman (), Steven Matusz (), Fredrik Sjöholm () and Susan Chun Zhu ()
Additional contact information
Carl Davidson: Department of Economics, Michigan State University
Fredrik Heyman: Research Institute of Industrial Economics, Stockholm
Steven Matusz: Department of Economics, Michigan State University
Fredrik Sjöholm: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Susan Chun Zhu: Department of Economics, Michigan State University

Abstract: Globalization might affect the mix of jobs available in an economy and the rate at which workers gain skills. We develop a model in which firms differ in terms of productivity and skills and use the model to examine how globalization affects the wage distribution and the career path of workers as they move up the jobs ladder. There are two types of skills that determine a worker’s productivity in the model: the ability to work with the appropriate technology and the ability to facilitate international commerce. Workers imperfectly acquire these skills on the job. Firms cannot costlessly observe the skills embodied in a worker but can observe each potential recruit’s employment history. In equilibrium, firms self-select into groups that use different networks to fill vacancies. Our results indicate that although falling trade costs may result in greater wage inequality, if trade costs are initially high, it can also lead to a wider path up the jobs ladders and less time spent in entry level jobs. The key assumptions and predictions are confirmed in data on recruitments and job mobility in Sweden.

Keywords: Job Ladders; Globalization; Wages; Inequality; Export

JEL-codes: F10; F20; J30

54 pages, November 12, 2018

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