The Global Division of Labour

The common theme of activities in this research area is to empirically assess major aspects of the international division of labor in the globalizing world economy. In this way, we contribute to finding more convincing answers to the challenges of globalization. We focus on the determinants and effects of outsourcing and offshoring through trade and foreign direct investment (FDI) at the global and regional level, i.e., aspects of globalization that appear to be highly relevant in both academic and public debates:

• An increasing number of countries consider FDI a promising means to become integrated into the global division of labor. However, the determinants of FDI continue to be controversially debated in the academic literature, especially with regard to the effectiveness of specific policy measures in attracting FDI. Likewise, it remains open to question whether FDI has the desired effect of inducing catching-up processes in lower-income host countries. Given the fierce competition for FDI between countries, empirical insights to these effects are of obvious policy relevance.
• It is important to take account of firm and worker level heterogeneity when assessing the impact of globalisation on firm and labour market adjustment. Large firm level panel data sets are used to investigate the relationship between firms' decisions to engage in global markets through exporting, international outsourcing, or foreign direct investment, and measures of firm performance such as productivity, employment or wages. Furthermore, we investigate the implications of globalisation on workers, combining individual level worker data with industry measures of international outsourcing. 
• The consequences of trade and FDI on specialization patterns will be analyzed by combining elements from growth theory and trade theory. Academically, the notions of “Strukturwandel” and the "Grand Transition" involve controversial issues such as the effects of technical change on international factor price equality and the patterns of change in sector-specific output and employment, which are both part of a broader pattern of transition in the course of economic development. These patterns of change will be analyzed for the world economy as a whole, but also for specific country groups and regions. Research on these issues is expected to offer meaningful insights for the public debate on the distributional conflicts resulting from an increasing global division of labor.
• European integration constitutes an important part of planned research activities as many of the adjustment processes attributed to globalization have been going on for quite a while at the regional European level. First, the consequences of European integration for the localization of economic activities shall be analyzed by means of new measures of industrial concentration and regional specialization. Second, an econometric study shall shed light on how and to what extent decreasing spatial transaction costs impact on the spatial distribution of employment in Europe. And third, a study of the current infrastructure endowments in new EU member states as well as of the development of logistics networks between old and new EU member states shall identify infrastructure bottlenecks that impede a more intensive division of labor in the European Union through outsourcing or offshoring. 

In summary, activities in the research area “Global Division of Labor” address the challenge of integrating an increasing number of countries into the international division of labor without widening the income gap between these countries, as well as the corresponding challenge of adjusting the pattern of specialization of integrating countries without widening the income differences within these countries.