Advanced Search
MyIDEAS: Login to save this article or follow this journal

Trade With Central and Eastern Europe: Is It Really a Threat to Wages in the West?

Contents:

Author Info

  • Eva Katalin Polgar

    ()
    (European Central Bank)

  • Julia Woerz

    ()
    (Oesterreichische Nationalbank)

Abstract

This paper analyses the relationship between openness to trade and wages at the industry level (15 manufacturing industries) in 25 EU countries over the period from 1995 to 2005. By applying a cross-country and industry-specific approach, it is possible to kontrol for unobserved heterogeneity at both country and industry levels. We also differentiate between intra and inter-industry trade as well as between trade from western and eastern Europe and we try to assess the relative importance of foreign wages versus domestic productivity developments in an open environment.We find that trade is not an important driver of wages, since the wage response to trade is small. Moreover, in line with the Stolper-Samuelson reasoning, imports from the west generally benefit wages in central and eastern Europe, while imports from the east rather tend to harm wages in the west. The overall wage response is still negative in some sectors, particularly in more resourcebased industries. Nevertheless, increased trade reinforces the productivity-wage link and weakens the co-movement of wages, particularly in the west, while at the industry level there is little evidence of such a wage-disciplining effect of trade.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.eaco.eu/documents/issue/Eva_Polgar-Julia_Worz.pdf
Download Restriction: no

Bibliographic Info

Article provided by European Association Comenius - EACO in its journal DANUBE: Law and Economics Review.

Volume (Year): (2011)
Issue (Month): 1 (March)
Pages: 1-31

as in new window
Handle: RePEc:cmn:journl:y:2011:i:1:p:1-31

Contact details of provider:
Web page: http://www.eaco.eu

Related research

Keywords: Openness; Wages; Bilateral Trade; European Integration; Wage Discipline; Industry Level;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Manasse, Paolo & Turrini, Alessandro, 2001. "Trade, wages, and 'superstars'," Journal of International Economics, Elsevier, vol. 54(1), pages 97-117, June.
  2. Orazio Attanasio & Pinelopi Goldberg & Nina Pavcnik, 2003. "Trade Reforms and Wage Inequiality in Colombia," NBER Working Papers 9830, National Bureau of Economic Research, Inc.
  3. Krugman, Paul R., 2000. "Technology, trade and factor prices," Journal of International Economics, Elsevier, vol. 50(1), pages 51-71, February.
  4. Giovanni S.F. Bruno & Rosario Crinò & Anna M. Falzoni, 2004. "Foreign Direct Investment, Wage Inequality, and Skilled Labor Demand in EU Accession Countries," Development Working Papers 188, Centro Studi Luca d\'Agliano, University of Milano.
  5. Geishecker, Ingo & Görg, Holger, 2007. "Winners and losers: A Micro-level Analysis of International Outsourcing and Wages," CEPR Discussion Papers 6484, C.E.P.R. Discussion Papers.
  6. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 31-66.
  7. Hofer, Helmut & Huber, Peter, 2001. "Wage and Mobility Effects of Trade and Migration on the Austrian Labour Market," Economics Series 97, Institute for Advanced Studies.
  8. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
  9. Geishecker, Ingo & Görg, Holger, 2004. "Winners and Losers: Fragmentation, Trade and Wages Revisited," IZA Discussion Papers 982, Institute for the Study of Labor (IZA).
  10. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  11. Leamer, Edward E, 1996. "Wage Inequality from International Competition and Technological Change: Theory and Country Experience," American Economic Review, American Economic Association, vol. 86(2), pages 309-14, May.
  12. Robert Stehrer, 2007. "The effects of factor and sector biased technical change revisited," FIW Working Paper series 006, FIW.
  13. Galiani, Sebastian & Sanguinetti, Pablo, 2003. "The impact of trade liberalization on wage inequality: evidence from Argentina," Journal of Development Economics, Elsevier, vol. 72(2), pages 497-513, December.
  14. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
  15. Konstantin Wacker, 2010. "The Influence of Trade with the EU-15 on Wages in the Czech Republic, Hungary, Poland, and Slovakia between 1997 and 2005," FIW Working Paper series 047, FIW.
  16. Damiaan Persyn, 2008. "Trade as a Wage Disciplining Device," LICOS Discussion Papers 21008, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  17. J. David Richardson, 1995. "Income Inequality and Trade: How to Think, What to Conclude," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 33-55, Summer.
  18. Winter-Ebmer, Rudolf & Zimmermann, Klaus F., 1998. "East-West Trade and Migration: The Austro-German Case," IZA Discussion Papers 2, Institute for the Study of Labor (IZA).
  19. Mason, Patrick L., 1994. "An empirical derivation of the industry wage equation," MPRA Paper 11325, University Library of Munich, Germany.
  20. Piero Esposito & Robert Stehrer, 2007. "The Sector Bias of Skill-biased Technical Change and the Rising Skill Premium in Transition Economies," wiiw Working Papers 43, The Vienna Institute for International Economic Studies, wiiw.
  21. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
  22. Özlem Onaran & Engelbert Stockhammer, 2006. "The effect of FDI and foreign trade on wages in the Central and Eastern European Countries in the post-transition era: A sectoral analysis," Department of Economics Working Papers wuwp094, Vienna University of Economics, Department of Economics.
  23. Pushan Dutt & Devashish Mitra & Priya Ranjan, 2007. "International Trade and Unemployment: Theory and Cross-National Evidence," Working Papers 070808, University of California-Irvine, Department of Economics.
  24. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact Of Outsourcing And High-Technology Capital On Wages: Estimates For The United States, 1979-1990," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 907-940, August.
  25. Jean-Louis COMBES & Tahsin SAADI SEDIK, 2002. "How does Trade openness Influence Budget Deficits?," Working Papers 200209, CERDI.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cmn:journl:y:2011:i:1:p:1-31. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zuzana Machova).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.