2 openness and the standard deviation of a country's terms of trade,is positively correlated with growth volatility.In contrast,Iversen and Cusack (2000)contend that there is no convincing evidence that international trade increases economic insecurity.They argue that Rodrik's correlation is not sufficient,and that it is necessary either that price volatility in international markets be greater than in domestic markets or that trade concentrate rather than diversify economic risks.Iversen and Cusack then present evidence that,at least for advanced economies, there is no correlation between trade openness and volatility in output,earnings,or employment. In this paper,we investigate whether international economic integration increases economic insecurity.Our analysis makes a substantial departure from existing research by focusing on a relatively overlooked dimension of globalization:the cross-border flow of FDI within multinational enterprises(MNEs).This focus on FDI rather than trade is rare in the literature, and we argue that this omission matters for both empirical and theoretical reasons. Empirically,in recent decades,cross-border flows of FDI have grown at much faster rates than have flows of goods and services.UNCTAD (2001)reports that from 1986 through 2000, worldwide cross-border outflows of FDI rose at an annualized rate of 26.2%,versus a rate of 15.4%for worldwide exports of goods and services.In the second half of the 1990s this difference widened to 37.0%versus just 1.9%.Moreover,it is the multinationalization of production that a number of scholars have pointed to as the distinguishing feature of the current phase of globalization compared to previous eras(e.g.,Bordo,Eichengreen,and Irwin 1999). This lack of attention to FDI also matters because,as we will discuss,there are strong theoretical reasons to believe that FDI can substantially influence economic insecurity.The globalization of production by MNEs gives firms greater access to foreign factors of production, and thus greater ease of substitution away from workers in any single location.As a result,2 openness and the standard deviation of a country’s terms of trade, is positively correlated with growth volatility. In contrast, Iversen and Cusack (2000) contend that there is no convincing evidence that international trade increases economic insecurity. They argue that Rodrik’s correlation is not sufficient, and that it is necessary either that price volatility in international markets be greater than in domestic markets or that trade concentrate rather than diversify economic risks. Iversen and Cusack then present evidence that, at least for advanced economies, there is no correlation between trade openness and volatility in output, earnings, or employment. In this paper, we investigate whether international economic integration increases economic insecurity. Our analysis makes a substantial departure from existing research by focusing on a relatively overlooked dimension of globalization: the cross-border flow of FDI within multinational enterprises (MNEs). This focus on FDI rather than trade is rare in the literature, and we argue that this omission matters for both empirical and theoretical reasons. Empirically, in recent decades, cross-border flows of FDI have grown at much faster rates than have flows of goods and services. UNCTAD (2001) reports that from 1986 through 2000, worldwide cross-border outflows of FDI rose at an annualized rate of 26.2%, versus a rate of 15.4% for worldwide exports of goods and services. In the second half of the 1990s this difference widened to 37.0% versus just 1.9%. Moreover, it is the multinationalization of production that a number of scholars have pointed to as the distinguishing feature of the current phase of globalization compared to previous eras (e.g., Bordo, Eichengreen, and Irwin 1999). This lack of attention to FDI also matters because, as we will discuss, there are strong theoretical reasons to believe that FDI can substantially influence economic insecurity. The globalization of production by MNEs gives firms greater access to foreign factors of production, and thus greater ease of substitution away from workers in any single location. As a result