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Trade and Wages: Winning and Losing Sectors in the Enlarged European Union

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This paper contributes to the abundant but as yet inconclusive literature on the effect increased openness to trade has on wages by presenting an analysis of industry-level data for 21 service and manufacturing industries in 25 EU countries covering the period from 1995 to 2005. By applying a cross-country and industry-specific approach, it is possible to control for unobserved heterogeneity at both country and industry levels. While we are able to identify some – often resource-based – industries as winners of increased trade integration, we find very few and comparatively small effects in general. The relation between trade and wages tends to be weaker in Western European countries (EU-15) than in the EU Member States in Central and Eastern Europe (EU-10). At the same time, greater trade openness appears to have increased the influence wage levels abroad – as opposed to productivity – have on wage setting in the EU-15. By contrast, wages in the EU-10 have become less responsive to foreign wages and more realigned with productivity developments as a result of trade openness.

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  • Éva Katalin Polgár & Julia Wörz, 2009. "Trade and Wages: Winning and Losing Sectors in the Enlarged European Union," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 6-35.
    • Handle: RePEc:onb:oenbfi:y:2009:i:1:b:1
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    File URL: https://www.oenb.at/dam/jcr:f98ef6fa-c09b-41cd-b0ba-72ffc86e26bf/feei_2009_q1_polgar_woerz_tcm16-97950.pdf
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    Cited by:

    1. Eva Katalin Polgar & Julia Woerz, 2011. "Trade With Central and Eastern Europe: Is It Really a Threat to Wages in the West?," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 1-31, March.
    2. Martin Bijsterbosch & Marcin Kolasa, 2010. "FDI and productivity convergence in Central and Eastern Europe: an industry-level investigation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(4), pages 689-712, January.
    3. Éva Polgár & Julia Wörz, 2010. "No risk and some fun? Trade and wages in the enlarged European Union," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 37(2), pages 127-163, May.

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