6 (e)re repectively given byandIfsradom variable. then we can write Var(w)= Var(mrp)and Var(e)= Var(mrp). The above expressions demonstrate that greater volatility in labor-market outcomes-and thus greater economic insecurity-can arise either from greater aggregate volatility in prices and technology,Var(mrp),or from a higher elasticity of demand for labor,nD.The former can be thought of as the volatility of aggregate shocks to labor demand,and the latter can be thought of as the pass-through of those shocks into volatility of wages and employment.In this framework, the link between globalization and labor-market volatility depends on some component of globalization,such as trade or FDI,altering one of these quantities,Var(mrp)or nD. We argue that an important channel through which FDI can affect labor-market volatility is by increasing labor-demand elasticities via the substitution effect.Suppose that a firm is vertically integrated with a number of production stages.A multinational firm can move abroad some of these stages (e.g.,Helpman 1984).This globalization of production within multinationals gives access to foreign factors of production,either directly through foreign affiliates or indirectly through intermediate inputs.This expands the set of factors firms can substitute towards in response to higher domestic wages beyond just domestic non-labor factors to include foreign factors as well.Thus,greater FDI can raise labor-demand elasticities-and so worker insecurity because of more-volatile wage and employment outcomes This argument does not exclude other mechanisms through which globalization may increase economic insecurity.For example,openness to international trade may increase the volatility of aggregate shocks to labor demand (Var(mrp)).As discussed in the introduction,this is the link6 ( ∧ e ) are respectively given by ∧ ∧         + w = mrp S D D η η η and ∧ ∧         + e = mrp S D D S η η η η . If ∧ mrp is a random variable, then we can write ( ) ( ) 2 ∧         + = ∧ Var w Var mrp S D D η η η and ( ) ( ) 2 ∧         + = ∧ Var e Var mrp S D D S η η η η . The above expressions demonstrate that greater volatility in labor-market outcomes—and thus greater economic insecurity—can arise either from greater aggregate volatility in prices and technology, ) ( ∧ Var mrp , or from a higher elasticity of demand for labor, ηD. The former can be thought of as the volatility of aggregate shocks to labor demand, and the latter can be thought of as the pass-through of those shocks into volatility of wages and employment. In this framework, the link between globalization and labor-market volatility depends on some component of globalization, such as trade or FDI, altering one of these quantities, ) ( ∧ Var mrp or ηD. We argue that an important channel through which FDI can affect labor-market volatility is by increasing labor-demand elasticities via the substitution effect. Suppose that a firm is vertically integrated with a number of production stages. A multinational firm can move abroad some of these stages (e.g., Helpman 1984). This globalization of production within multinationals gives access to foreign factors of production, either directly through foreign affiliates or indirectly through intermediate inputs. This expands the set of factors firms can substitute towards in response to higher domestic wages beyond just domestic non-labor factors to include foreign factors as well. Thus, greater FDI can raise labor-demand elasticities—and so worker insecurity because of more-volatile wage and employment outcomes. This argument does not exclude other mechanisms through which globalization may increase economic insecurity. For example, openness to international trade may increase the volatility of aggregate shocks to labor demand ( ) ( ∧ Var mrp ). As discussed in the introduction, this is the link