This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Trade liberalization and economic geography in transition countries: Can FDI explain the adjustment patterns of regional wages?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Jože P. Damijan
Crt Kostevc

Additional information is available for the following registered author(s):

Abstract

Present paper studies the within-country regional effects of trade liberalization in transition countries. We argue that FDI inflows can be an important factor to accelerate the regional adjustment process in the home country. In order to underspin this theoretically, we first augment the new economic geography models by breaking the implied regional symmetry and by introducing capital as a second factor of production. Major contribution of our approach is that it allows for inter-regional as well as international capital mobility while labor is assumed to be immobile. Numerical simulations of our model indicate that this should contribute to faster convergence of relative regional wages in the smaller region. In addition, we examine the exact adjustment pattern of relative regional wages in five transition countries in the period 1990-2004 after they have liberalized their trade with the EU. First, we show that in four out of five transition countries there is a significant u-shaped adjustment pattern of regional wages after they opened up to foreign trade. And second, we find robust econometric confirmation that in three of the five countries FDI has contributed significantly to faster adjustment of relative regional wages.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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.econ.kuleuven.ac.be/licos/DP/DP2008/DP222.pdf
File Format:
File Function:
Download Restriction: no

Publisher Info
Paper provided by LICOS - Centre for Institutions and Economic Performance, K.U.Leuven in its series LICOS Discussion Papers with number 22208.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:lic:licosd:22208

Contact details of provider:
Postal: De B�riotstraat 34, B-3000 Leuven
Phone: +32 (0) 16 / 32 6598
Fax: +32 (0) 16 / 32 6599
Email:
Web page: http://www.econ.kuleuven.ac.be/licos
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords: economic geography; trade costs; wages; transition countries; foreign direct investment;

Other versions of this item:

Find related papers by JEL classification:
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

This paper has been announced in the following NEP Reports:

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.:
  1. Steven Brakman & Harry Garretsen & Marc Schramm, 2004. "The Spatial Distribution of Wages: Estimating the Helpman-Hanson Model for Germany," Journal of Regional Science, Blackwell Publishing, vol. 44(3), pages 437-466. [Downloadable!] (restricted)
  2. Marius Brülhart & Pamina Koenig, 2006. "New economic geography meets Comecon," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(2), pages 245-267, 04. [Downloadable!] (restricted)
  3. Forslid, Rikard & Haaland, Jan I. & Midelfart Knarvik, Karen Helene, 2002. "A U-shaped Europe?: A simulation study of industrial location," Journal of International Economics, Elsevier, vol. 57(2), pages 273-297, August. [Downloadable!] (restricted)
  4. Joze P. Damijan & Mark Knell & Boris Majcen & Matija Rojec, 2003. "Technology Transfer through FDI in Top-10 Transition Countries: How Important are Direct Effects, Horizontal and Vertical Spillovers?," William Davidson Institute Working Papers Series 549, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  5. Marius Brülhart & Matthieu Crozet & Pamina Koenig, 2004. "Enlargement and the EU Periphery: The Impact of Changing Market Potential," The World Economy, Blackwell Publishing, vol. 27(6), pages 853-875, 06. [Downloadable!] (restricted)
    Other versions:
  6. Krugman, Paul & Venables, Anthony J., 1996. "Integration, specialization, and adjustment," European Economic Review, Elsevier, vol. 40(3-5), pages 959-967, April. [Downloadable!] (restricted)
    Other versions:
  7. J. Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June. [Downloadable!] (restricted)
    Other versions:
  8. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 857-80, November. [Downloadable!] (restricted)
    Other versions:
  9. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February. [Downloadable!] (restricted)
    Other versions:
  10. Jože P. Damijan & Matija Rojec, 2007. "Foreign Direct Investment and Catching Up of New EU Member States: Is There a Flying Geese Pattern?," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(2), pages 91-118.
  11. Diego Puga, 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," CEP Discussion Papers dp0279, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  12. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, vol. 107(440), pages 113-33, January. [Downloadable!] (restricted)
  13. Brülhart, Marius, 1996. "Regional Integration, Scale Economies and Industry Location in the European Union," CEPR Discussion Papers 1435, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  14. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November. [Downloadable!] (restricted)
    Other versions:
  15. Resmini, Laura, 2003. "Economic integration, industry location and frontier economies in transition countries," Economic Systems, Elsevier, vol. 27(2), pages 205-221, June. [Downloadable!] (restricted)
  16. Mion, Giordano, 2004. "Spatial externalities and empirical analysis: the case of Italy," Journal of Urban Economics, Elsevier, vol. 56(1), pages 97-118, July. [Downloadable!] (restricted)
    Other versions:
  17. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
    Other versions:
  18. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, vol. 49(1), pages 137-150, April. [Downloadable!] (restricted)
    Other versions:
  19. Crozet, Matthieu & Koenig Soubeyran, Pamina, 2004. "EU enlargement and the internal geography of countries," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 265-279, June. [Downloadable!] (restricted)
    Other versions:
  20. Peter Egger & Peter Huber & Michael Pfaffermayr, 2005. "A note on export openness and regional wage disparity in Central and Eastern Europe," The Annals of Regional Science, Springer, vol. 39(1), pages 63-71, 03. [Downloadable!] (restricted)
  21. Fidrmuc, Jan, 2004. "Labor mobility during transition : evidence from the Czech Republic," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 37(4), pages 437-450. [Downloadable!]
    Other versions:
  22. Puga, Diego & Venables, Anthony J., 1997. "Preferential trading arrangements and industrial location," Journal of International Economics, Elsevier, vol. 43(3-4), pages 347-368, November. [Downloadable!] (restricted)
    Other versions:
  23. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
    Other versions:
  24. Hanson, Gordon H., 1996. "Economic integration, intraindustry trade, and frontier regions," European Economic Review, Elsevier, vol. 40(3-5), pages 941-949, April. [Downloadable!] (restricted)
  25. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September. [Downloadable!] (restricted)
    Other versions:
Full references

Statistics
Access and download statistics

Did you know? Over 1000 institutions contribute their bibliographic data directly to this service.

This page was last updated on 2009-11-26.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.