Globalization and the working poor

Working Paper 2015-355

Abstract

We analyse the effect of globalisation on the incidence of in-work poverty in advanced European countries. We firstly develop an analytical framework that provides bases for the empirical work. Using the EU-SILC database between 2005 and 2010 supplemented by macro-data, we apply both a fixed effect model at the country level and a multilevel model at the individual level. In line with the analytical predictions, trade with emerging countries has a positive and significant effect on in-work poverty whereas the effect of trade with developed countries is non-significant. The impact of social protection indicators is non-significant as well, which suggest that the efficiency effect and the compensation effect could balance each other. Hence, globalization has a positive effect on in-work poverty, which is essentially based on trade with emerging countries.

Authors: Joel Hellier, Ekaterina Kalugina.