Document de Travail de la DG Trésor n° 2007/03 - New trends in globalisation and the international division of labour: Consequences for Europe

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A new trend in globalisation has occurred since the end of the 1990s, linked to the emergence of China, namely the revival of inter-industry trade. This paper seeks to assess the long-term effects of this new trend in the skill structure of labour demand in Europe. We conduct a comparative analysis, estimating extrapolations for labour demand and supply in manufacturing industry to 2020, taking the skill structure of labour demand into account. We estimate the impact of the growth in inter-industry trade on skill demand, together with the impact of technological change induced by increased inter-industry trade.

Our findings suggest that this trend may significantly modify the industry structure of manufacturing in the EU, entailing the displacement of workers of all skill levels from certain sectors to others. It ought also to depress overall demand for low and medium-skilled workers. However, once the services sector and the natural evolution of skill supply are taken into account , it looks as if the medium-skilled could be the group most vulnerable to globalisation. But the low-skilled too could also come under pressure by contagion.