IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Trade with central and eastern Europe: Is it really a threat to wages in the west?

  • Polgár, Éva Katalin
  • Wörz, Julia

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 control 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 resource-based 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. JEL Classification: F14, F15, F16, J31

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.ecb.europa.eu/pub/pdf/scpwps/ecbwp1244.pdf
Download Restriction: no

Paper provided by European Central Bank in its series Working Paper Series with number 1244.

as
in new window

Length:
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:ecb:ecbwps:20101244
Contact details of provider: Postal: 60640 Frankfurt am Main, Germany
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
Email:


More information through EDIRC

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. Andrew Bernard & Stephen Redding & Peter Schott, 2004. "Comparative advantage and heterogeneous firms," IFS Working Papers W04/24, Institute for Fiscal Studies.
  2. Paolo Manasse & Alessandro Turrini, 1999. "Trade, Wages and ´Superstars’," Development Working Papers 127, Centro Studi Luca d\'Agliano, University of Milano.
  3. Piero Esposito & Robert Stehrer, 2009. "The sector bias of skill-biased technical change and the rising skill premium in transition economies," Empirica, Springer, vol. 36(3), pages 351-364, August.
  4. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
  5. Giovanni S.F. Bruno & Anna M.Falzoni & Rosario Crinò, 2005. "Foreign Direct Investment, Wage Inequality, and Skilled Labor Demand in EU Accession Countries," Working Papers (-2012) 0501, University of Bergamo, Department of Economics.
  6. Robert Stehrer, 2010. "The effects of factor and sector biased technical change revisited," Economic Change and Restructuring, Springer, vol. 43(1), pages 65-94, February.
  7. 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.
  8. 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.
  9. Paul Krugman, 1995. "Technology, Trade, and Factor Prices," NBER Working Papers 5355, National Bureau of Economic Research, Inc.
  10. Ingo Geishecker & Holger Görg, 2008. "Winners and losers: a micro-level analysis of international outsourcing and wages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 243-270, February.
  11. Geishecker, Ingo & Görg, Holger, 2004. "Winners and Losers: Fragmentation, Trade and Wages Revisited," IZA Discussion Papers 982, Institute for the Study of Labor (IZA).
  12. 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.
  13. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  14. Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, vol. 74(2), pages 331-366, August.
  15. 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.
  16. 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.
  17. 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.
  18. 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 and Business, Department of Economics.
  19. Mason, Patrick L., 1994. "An empirical derivation of the industry wage equation," MPRA Paper 11325, University Library of Munich, Germany.
  20. Helmut Hofer & Peter Huber, 2003. "Wage and Mobility Effects of Trade and Migration on the Austrian Labour Market," Empirica, Springer, vol. 30(2), pages 107-125, June.
  21. 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.
  22. Persyn, Damiaan, 2008. "Trade as a Wage Disciplining Device," IZA Discussion Papers 3786, Institute for the Study of Labor (IZA).
  23. Jean-Louis COMBES & Tahsin SAADI SEDIK, 2002. "How does Trade openness Influence Budget Deficits?," Working Papers 200209, CERDI.
  24. 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.
  25. 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).
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20101244. 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: (Official Publications)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.