Other studies reach a similar conclusion. In Latin America, during two decades of increased exposure to foreign trade and international capital Imovements there was only a mild upward trend in unemployment rates. The increase was dramatic in a few countries, such as Argentina, Colombia or Paraguay. But the median rate grew by only one percentage point (World Bank, 2000a). This relative stability is in contrast with the popular perception, as reflected in opinion polls. Risk of unemployment ranks as one of the main concerns voiced by those surveyed, in most of the region. Another interesting puzzle is that many of those who became unemployed in recent years used to work in the informal sector of the economy and, therefore, were not directly exposed to import competition or exchange rate fluctuations (Arango and Maloney, 2000).

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As globalization can create losers, and not just winners, it is important to identify what, if anything, can be done do to mitigate the impact of economic reforms aimed at integrating the economy more closely to the rest of the world. A large array of government interventions has been tried in the developing world, and the lessons learned in one country could prove useful in others. Some of these interventions are intended to help workers cope with job loss. Others could be used to limit the negative effects of globalization on specific groups of workers and households. These negative effects could include the potential decline in the earnings of unskilled workers, the reliance on child labor in export-oriented industries, and the increased volatility of employment and earnings potentially associated with terms-of-trade fluctuations and short-term capital movements. Even if these negative effects do not materialize in the end, preparedness would be key to build support for economic reforms.

The most effective ways to mitigate the adverse effects of globalization are probably out of the labor market. If exposure to international trade and foreign direct investment increases the returns to education, thus widening the earnings gap between skilled and unskilled workers, an effective education policy should be a priority. Higher, and more evenly distributed levels of schooling would be key to ensure that the gains from globalization are widespread. If intemational capital flows and the resulting macroeconomic fluctuations may lead to a substantial decline in the labor share of income, sound fiscal and financial policies should be a priority. Minimizing the risk that the country will default on its obligations, and that a banking crisis will occur, would help avoiding panic and herd behavior by foreign investors.

But labor market policies are needed too, especially to mitigate the impact ofjob loss. These policies can be classified in two groups: one-time interventions and permanent programs. One-time interventions have been used in industrial countries to process the restructuring of declining industries, such as steel mills or shipyards. In developing countries, they have been common in the context of public sector downsizing. Offering compensation and assistance to those bound to lose their jobs has been a way to defuse resistance to privatization, trade liberalization or market deregulation in industries where insiders are vocal and powerful. Compensation of this sort can be criticized on the grounds that public sector workers are seldom poor, and tend not to fall in poverty in 20