Economic Insecurity and the Globalization of Production

A common claim in debates about globalization is that economic integration increases worker insecurity. Although this idea is central to both political and academic debates about international economic integration, the theoretical basis of the claim is often not clear and critically there is no empirical research that has directly tested the relationship. In this paper, we argue that economic insecurity among workers may be related to deteriorating employment and/or wage interactions with employers and that foreign direct investment is a key factor contributing to this deterioration. We present new empirical evidence, based on the analysis of panel data from Great Britain collected from 1991-1999, that FDI activity in the industries in which individuals work is positively correlated with individual perceptions of economic insecurity. This relationship is evident in cross-sectional specifications for each year of the panel, in a pooled analysis accounting for individual-specific effects, and in a dynamic panel model also accounting for individual-specific effects.