Globalisation brings benefits and increases in welfare to the world society. The gains from trade and migration will, however, be unevenly distributed. To ease the negative effects on distribution, ‘generous’ social insurance may be a necessity.

However, warnings have been raised that social insurance might induce wage rigidities and worsen the adaptation process. There is a trade off between efficiency and protection against risk.

The purpose of this paper is to discuss how social insurance can meet this trade off and the challenges of globalisation, as well as what different designs of social insurance mean for the adaptation process. Economic theory / international economics is used to show effects of trade and migration on labour markets.  Social insurance is then analysed and discussed tentatively.