Literature Review

Globalization is the integration of goods, services, financial and capital markets on a world scale. From the perspective of firms, this integration means having access to broader markets but also facing tougher competition. In order to remain competitive in global markets, firms have to adjust by engaging in innovation, developing new products and adopting new technologies. They must also adjust by adapting their workforce to the new competitive environment. Such adjustment is costly, however, and workers bear a large share of the cost of adjustment to globalization. In this context, what are the responses policy-makers can offer to mitigate those costs and make globalization more inclusive? This chapter reviews the literature on adjustment policies with a view to answering this question.