Economic Change, the Global Division of Labor, and Prosperity

• Applicant: Professor Dr. Hartmut Egger
• Subject Area: Economic Theory ; Statistics and Econometrics ; Economic Policy, Applied Economics
• Term: since 2020
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 442940844

Globalization, technological progress and structural change affect country-wide prosperity and redistribute incomes between households who face diverse opportunities. The uneven distribution of human skills and abilities, and their varying local availability of complementary production factors and institutions that alter the returns to human capital, are at the heart of the global division of labor and technological progress. Conversely, the global division of labor and the adoption of new technology alter those returns to human skills and abilities. The resulting inequities are a cause for discontent with globalization and reservations against technical change despite the advance of overall prosperity. In- equities are therefore both a driver of and a societal break on globalization and technical change. Most households derive most of their income from wage earnings, so we propose to study globalization, technology adoption and structural change under a labor-market viewpoint (in three modules).Module A pursues a macroeconomic perspective on "Global economic change and labor-market outcomes". We take an empirical step back and apply principal component analysis to longitudinal household data across many economies to isolate the strongest candidate factors for the observed labor-market outcomes. In a second step, we then propose to extend recent structural models to include globalization, technology and structural change as economic shocks and trace out labor-market responses in a calibrated model for European countries.In Module B on "Workplace changes and the global division of labor" we take a microeconomic look into the matching of workers not just to employers but also to occupations within employers and use detailed German data on tasks to achieve this goal. We build on the observed use of multitasking to construct a model for studying the division of labor within plants in the cross section of employers and the impact of globalization on employer performance and worker incomes. Furthermore, the observed association of multitasking with technology use in the workplace will help us study technological change and its impact over time.Module C on "Household-level responses to economic change" poses the natural follow-up question as to how households and their members cope with labor-market consequences through intra-household adjustments, occupational switches and cross-regional migration given their skills, abilities, and personal networks. We will retrain the microeconomic lens on occupations and ask how economic changes alter the mismatch between the supply of worker skills and the demands of tasks in shrinking and expanding occupations. Over the course of our three-year project we expect to produce high-impact articles for ultimate submission to scientific journals of general and top-field interest. Beyond the scientific benefits, we anticipate policy relevant insights into location-based and active labor-market policies.

• DFG Programme: Research Grants
• International Connection: Switzerland
• Cooperation Partner: Professor Dr. Reto Föllmi