Abstract

Are locally-provided jobs, such as plumbers or drivers, sheltered from globalization? Within the European Union, the posting policy allows firms in one country to send (“post”) their workers to perform such services in another country. Assembling novel exhaustive administrative data on this continent-wide experiment, I show that the staggered liberalization of posting permanently increased cross-border provision of services by 500% in Europe. Globalization is larger and broader than previously thought: 2% of EU GDP is offshored “on-site” through post-ing, mostly in “non-tradable” sectors, while within-EU geographic mobility is twice as large once accounting for posted workers. Exploiting exposure to the liberalization in high-wage receiving countries, I find that blue collar employment in formerly “non tradable” sectors decreased following the shock, both at the industry and receiving- firm-level. Detailed receiving-firm-level data shows that firms access cheaper labor through low bargaining power of posted workers compared to domestic workers at the same workplace. I then demonstrate that posting openness triggered large economic gains in low-wage sending countries as firms formerly sheltered from export opportunities access foreign markets. Detailed sending-firm-level event studies further show that profits gains from services exports are twice larger than wage gains redistributed to posted employees. Overall, my results suggest that the redistribution of market shares in formerly non-tradables sectors was mainly paid for by low-paid workers in Western European countries, while gains mostly accrued to firms’ owners due to low bargaining power of workers in services. These large redistributive implications had small efficiency effects: calibrating a stylized trade model with posting elasticity estimates, I find that services’ trade liberalization increased European consumers’ gains by 0.3%.