Volume 20, Number 4 Article by Ashima Goyal December, 2008
The Impact of ICT in Making Global Markets More Inclusive :
Information and Communication Technologies (ICTs) have impacted global markets through their influence, among other things, on the virtual mobility of labour, network access and formation, splitting of production chains, and by inducing technological change. This article studies the impact of ICT on global markets through the framework of four theoretical ideas. First, models of search and matching are examined to explore the consequences of improved technology on matching distant labour to jobs in global markets. Although both parties gain, longer-term trends favour workers or emerging market firms that organise the workers. Since training and technology raise output and therefore wages and the surplus from the match, they have a self-reinforcing aspect. Second, in the context of network access and externalities, ICT reduces exclusion and leverage of existing networks to pressurise new entrants. Third, ICT fragments trade and increases complementarities as production processes are broken up and dispersed to least cost locations around the world. Fourth, ICT increases the global supply of medium skills. A rise in the supply of a resource may induce development of technology favouring that resource. If this happens, relative wages of medium-skill workers can be expected to rise.
The unexpected and rapid growth in global sourcing supports these theories. Analysis of data from two Indian medical transcription companies also shows that the greatest rise is in the wages of medium-skilled categories.
Government policy to boost these trends includes quality access and inclusion for ICT; gender sensitivity; reduction of trade barriers; labour market flexibility with emphasis on skills and training and specialised educational institutions with industry support; and regulation that supports innovation, networks and standards. Firms that base their strategies on the new trends can gain major advantages.
Reprint No 08401
