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Trade Protection and Industry Wage Structure in Poland

In: Globalization and Poverty

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  • Chor-ching Goh
  • Beata S. Javorcik

Abstract

This study examines the impact of Poland’s trade liberalization 1994-2001 on the industry wage structure. The liberalization was undertaken in preparation for Poland’s accession to the European Union and was more pronounced in industries with larger shares of unskilled labour. Our analysis indicates that a decrease in an industry tariff was associated with higher wages being earned by workers employed in the industry, controlling for worker characteristics and geographic variables. The result is robust to including year and industry fixed effects, controlling for industry-level exports, imports, concentration, stock of foreign direct investment and capital accumulation. The finding is consistent with liberalization increasing competitive pressures, forcing firms to restructure and improve their productivity, which in turn translates into higher profits being shared with workers. It could also be potentially attributed to trade liberalization lowering the costs of imported inputs, which enhances firm profitability. The result holds when skilled workers are excluded from the sample, thus suggesting that reductions in trade barriers benefited the unskilled in terms of an increase in wages.

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This chapter was published in:

  • Ann Harrison, 2007. "Globalization and Poverty," NBER Books, National Bureau of Economic Research, Inc, number harr06-1, octubre-d.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 0119.

    Handle: RePEc:nbr:nberch:0119

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    1. Fernandes, Ana M., 2007. "Trade policy, trade volumes and plant-level productivity in Colombian manufacturing industries," Journal of International Economics, Elsevier, vol. 71(1), pages 52-71, March.
    2. Noel Gaston & Daniel Trefler, 1994. "Protection, trade, and wages: Evidence from U.S. manufacturing," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(4), pages 574-593, July.
    3. Horstmann, Ignatius J. & Markusen, James R., 1986. "Up the average cost curve: Inefficient entry and the new protectionism," Journal of International Economics, Elsevier, vol. 20(3-4), pages 225-247, May.
    4. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
    5. Zadia M. Feliciano, 2001. "Workers and trade liberalization: The impact of trade reforms in Mexico on wages and employment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(1), pages 95-115, October.
    6. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Juan Botero, 2003. "The Regulation of Labor," NBER Working Papers 9756, National Bureau of Economic Research, Inc.
    7. Nina Pavcnik, 2000. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," NBER Working Papers 7852, National Bureau of Economic Research, Inc.
    8. Ana Fernandes, 2002. "Trade Policy, Trade Volumes and Plant-Level Productivity in Colombian Manufacturing Industries," Working Papers 847, Economic Growth Center, Yale University.
    9. Pravin Krishna & Devashish Mitra, . "Trade Liberalization, Market Discipline and Productivity Growth: New Evidence From India," Working Papers 96-8, Brown University, Department of Economics.
    10. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2003. "Trade, Wages and the Political Economy of Trade Protection: Evidence from the Colombian Trade Reforms," CEPR Discussion Papers 3877, C.E.P.R. Discussion Papers.
    11. Kim, Euysung, 2000. "Trade liberalization and productivity growth in Korean manufacturing industries: price protection, market power, and scale efficiency," Journal of Development Economics, Elsevier, vol. 62(1), pages 55-83, June.
    12. Harrison, Ann E., 1994. "Productivity, imperfect competition and trade reform : Theory and evidence," Journal of International Economics, Elsevier, vol. 36(1-2), pages 53-73, February.
    13. Deichmann, Uwe & Henderson, Vernon, 2000. "Urban and regional dynamics in Poland," Policy Research Working Paper Series 2457, The World Bank.
    14. Nina Pavcnik & Andreas Blom & Pinelopi Goldberg & Norbert Schady, 2004. "Trade Liberalization and Industry Wage Structure: Evidence from Brazil," World Bank Economic Review, World Bank Group, vol. 18(3), pages 319-344.
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    Cited by:
    1. Arnold, Jens & Javorcik, Beata S. & Mattoo, Aaditya, 2007. "Does services liberalization benefit manufacturing firms ? Evidence from the Czech Republic," Policy Research Working Paper Series 4109, The World Bank.
    2. Ann Harrison, 2007. "Globalization and Poverty," NBER Books, National Bureau of Economic Research, Inc, number harr06-1, octubre-d.
    3. Ann Harrison & Margaret McMillan, 2007. "On the links between globalization and poverty," Journal of Economic Inequality, Springer, vol. 5(1), pages 123-134, April.
    4. Elizabeth Jane Casabianca, 2012. "Distributional effects of preferential and multilateral trade liberalization: the case of Paraguay," FIW Working Paper series 083, FIW.

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