Working Paper No. 1249

Globalization and the Jobs Ladder

Published: November 19, 2018Pages: 53Keywords: Job Ladders; Globalization; Wages; Inequality; ExportJEL-codes: F10; F20; J30

Globalization and the Jobs Ladder Carl Davidson, Fredrik Heyman, Steven Matusz, Fredrik Sjöholm and Susan Chun Zhu


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. 

Fredrik Heyman

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Ph: +46 8 665 4537
fredrik.heyman@ifn.se

Fredrik Sjöholm

Contact

Ph: +46 46 222 74 26
fredrik.sjoholm@nek.l...

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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