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Globalization and Inflation in Europe

  • Auer, Raphael
  • Degen, Kathrin
  • Fischer, Andreas M

What is the impact of import competition from other low-wage countries (LWCs) on inflationary pressure in Western Europe? This paper seeks to understand whether labor-intensive exports from emerging Europe, Asia, and other global regions have a uniform impact on producer prices in Germany, France, Italy, Sweden, and the United Kingdom. In a panel covering 110 (4-digit) NACE industries from 1995 to 2008, IV estimates predict that LWC import competition is associated with strong price effects. More specifically, when Chinese exporters capture 1% of European market share, producer prices decrease about 2%. In contrast, no effect is present for import competition from low-wage countries in Central and Eastern Europe.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8130.

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Date of creation: Dec 2010
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Handle: RePEc:cpr:ceprdp:8130
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