IDEAS home Printed from https://ideas.repec.org/p/ecj/ac2004/127.html
   My bibliography  Save this paper

Extending The EU Single Market Eastwards: Sectoral Trade And Real Wage Effects

Author

Listed:
  • Helena Marques
  • Hugh Metcalf

Abstract

In this paper we address the question of the impact of permitting free migration in an enlarged trading bloc. We estimate two sectoral equations for trade flows and real wages of three regional blocs of the enlarged EU that we defined as North (wealthiest EU), South (Greece, Portugal and Spain) and East (acceding Central and Eastern European countries). We then use the estimated coefficients to compute potential trade flows and real wages for these three groups under the two alternative scenarios of an enlargement with and without free movement of labour. A fully-fledge Single Market allows the North, with good market access and human capital endowments, to consolidate its current hub position by attracting more firms and skilled workers. Thus its net exports of high scale economy, skill-intensive goods increase and so do overall real wages, though they decrease in low scale economies sectors. The South, with poor market access and human capital endowments, retains competitiveness in low scale economies, low skill-intensity sectors and sees an overall reduction in real wages, except in high scale economies, low skill-intensity sectors. The East, with poor market access but well endowed in human capital, has a marginal gain in trade terms but suffers a real wage loss. Moreover, skilled migration would cause a brain drain that, if of sufficiently large proportions, could have very damaging consequences in the long-term.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Helena Marques & Hugh Metcalf, 2004. "Extending The EU Single Market Eastwards: Sectoral Trade And Real Wage Effects," Royal Economic Society Annual Conference 2004 127, Royal Economic Society.
  • Handle: RePEc:ecj:ac2004:127
    as

    Download full text from publisher

    File URL: http://repec.org/res2004/MarquesMetcalf.pdf
    File Function: full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
    2. Dieter Schumacher, 1995. "Impact on German Trade of Increased Division of Labour with Eastern Europe," Discussion Papers of DIW Berlin 116, DIW Berlin, German Institute for Economic Research.
    3. Corado, Cristina, 1994. "Textiles and Clothing Trade with Central and Eastern Europe: Impact on Members of the EC," CEPR Discussion Papers 1004, C.E.P.R. Discussion Papers.
    4. Ethier,Wilfred J. & Helpman,Elhanan & Neary,J. Peter (ed.), 1993. "Theory, Policy and Dynamics in International Trade," Cambridge Books, Cambridge University Press, number 9780521434423, October.
    5. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    6. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Wiley Blackwell, vol. 20(3), pages 363-368, May.
    7. Mathilde Maurel & Guillaume Cheikbossian, 1998. "The New Geography of Eastern European Trade," Kyklos, Wiley Blackwell, vol. 51(1), pages 45-72, February.
    8. Vittas, H. & Mauro, P., 1995. "Potential Trade with Core and Periphery: Industry Differences in Trade Patterns," Papers 10, American Institute for Contemporary German Studies-.
    9. Gros, Daniel & Gonciarz, Andrzej, 1996. "A note on the trade potential of Central and Eastern Europe," European Journal of Political Economy, Elsevier, vol. 12(4), pages 709-721, December.
    10. Lionel Fontagné & Michaël Pajot & Michael Freudenberg, 1999. "Le potentiel d'échanges entre l'Union européenne et les PECO. Un réexamen," Revue Économique, Programme National Persée, vol. 50(6), pages 1139-1168.
    11. Black,Stanley W., 2008. "Europe's Economy Looks East," Cambridge Books, Cambridge University Press, number 9780521088237, October.
    12. Redding, Stephen & Venables, Anthony J., 2004. "Economic geography and international inequality," Journal of International Economics, Elsevier, vol. 62(1), pages 53-82, January.
    13. Havrylyshyn, Oleh & Pritchett, Lant, 1991. "European trade patterns after the transition," Policy Research Working Paper Series 748, The World Bank.
    14. Cristina Mastropasqua & Valeria Rolli, 1994. "Industrial Countries™ Protectionism with Respect to Eastern Europe: The Impact of the Association Agreements Concluded with the EC on the Exports of Poland, Czechoslovakia and Hungary," The World Economy, Wiley Blackwell, vol. 17(2), pages 151-170, March.
    15. László Mátyás, 1998. "The Gravity Model: Some Econometric Considerations," The World Economy, Wiley Blackwell, vol. 21(3), pages 397-401, May.
    16. Anthony Venables, 2001. "Geography and International Inequalities: The Impact of New Technologies," Journal of Industry, Competition and Trade, Springer, vol. 1(2), pages 135-159, June.
    17. Maurel, Mathilde & Cheikbossian, Guillaume, 1998. "The New Geography of Eastern European Trade," Kyklos, Wiley Blackwell, vol. 51(1), pages 45-71.
    18. Frédérique Festoc, 1997. "Le potentiel de croissance du commerce des pays d'Europe centrale et orientale avec la France et ses principaux partenaires," Économie et Prévision, Programme National Persée, vol. 128(2), pages 161-181.
    19. Buch, Claudia M. & Piazolo, Daniel, 2001. "Capital and trade flows in Europe and the impact of enlargement," Economic Systems, Elsevier, vol. 25(3), pages 183-214, September.
    20. Vassilis Monastiriotis, 2002. "Human capital and wages: evidence for external effects from the UK regions," Applied Economics Letters, Taylor & Francis Journals, vol. 9(13), pages 843-846.
    21. Fritz Breuss & Peter Egger, 1999. "How Reliable Are Estimations of East-West Trade Potentials Based on Cross-Section Gravity Analyses?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 26(2), pages 81-94, June.
    22. Cadot, Olivier & de Melo, Jaime, 1994. "The Europe Agreements and EC-LDC Relations," CEPR Discussion Papers 1001, C.E.P.R. Discussion Papers.
    23. Wang, Zhen Kun & Winters, L. Alan, 1991. "The Trading Potential of Eastern Europe," CEPR Discussion Papers 610, C.E.P.R. Discussion Papers.
    24. Gary L. Hunt & Richard E. Mueller, 2002. "A Methodology for Estimating Returns to Skills for Canadian Provinces and U.S. States," Journal of Regional Science, Wiley Blackwell, vol. 42(1), pages 127-143, February.
    25. Nilsson, Lars, 2000. "Trade integration and the EU economic membership criteria," European Journal of Political Economy, Elsevier, vol. 16(4), pages 807-827, November.
    26. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, vol. 107(440), pages 113-133, January.
    27. Baldwin, R.E. & Forslid, R. & Haaland, J.I. & Knarvik, K.H.M., 2000. "EU Integration and Outsiders. A Simulation Study of industrial Location," Papers 2/2000, Norwegian School of Economics and Business Administration-.
    28. Lionel Fontagné & Michael Frudenberg & Nicolas Péridy, 1998. "Commerce international et structures de marché : une vérification empirique," Économie et Prévision, Programme National Persée, vol. 135(4), pages 147-167.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Helena Marques & Hugh Metcalf, 2005. "What Determines Sectoral Trade in the Enlarged EU?," Review of Development Economics, Wiley Blackwell, vol. 9(2), pages 197-231, May.
    2. Helena Marques & Hugh Metcalf, 2006. "Ending Restrictions To Migration From The New Eu Member Countries: Sectoral Trade And Real Wage Effects," Contemporary Economic Policy, Western Economic Association International, vol. 24(2), pages 287-299, April.
    3. Helena Marques, 2008. "Trade And Factor Flows In A Diverse Eu: What Lessons For The Eastern Enlargement(S)?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(2), pages 364-408, April.
    4. José Manuel Martins Caetano & Aurora Galego, 2003. "An Analysis of Actual and Potential Trade between the EU Countries and the Eastern European Countries," Economics Working Papers 3_2003, University of Évora, Department of Economics (Portugal).
    5. Helena Marques, 2005. "The skilled u-shaped Europe: is it really and on which side does it stand?," Applied Economics, Taylor & Francis Journals, vol. 37(19), pages 2205-2220.
    6. Helena Marques & Hugh Metcalf, 2003. "Wage Gradients in an Enlarged EU," Discussion Paper Series 2003_13, Department of Economics, Loughborough University, revised Dec 2003.
    7. J. Caetano & A. Galego & E. Vaz & C. Vieira & I. Vieira, 2002. "The Eastward Enlargement of the Eurozone: Trade and FDI," Eastward Enlargement of the Euro-zone Working Papers wp07, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Aug 2002.
    8. Henry Overman & Stephen Redding & Anthony J. Venables, 2001. "The Economic Geography of Trade, Production, and Income: A Survey of Empirics," CEP Discussion Papers dp0508, Centre for Economic Performance, LSE.
    9. Björn Alecke, 2003. "Das Handelsvolumen der ostdeutschen Bundesländer mit Polen und Tschechien im Zuge der EU-Erweiterung: Ergebnisse auf Basis eines Gravitationsmodells," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(4), pages 565-578.
    10. Angela Cheptea, 2013. "Border Effects and European Integration," CESifo Economic Studies, CESifo, vol. 59(2), pages 277-305, June.
    11. Helena Marques & Hugh Metcalf, 2009. "Manufacturing Wages In The Enlarged Eu: The Role Of Neighbour‐Country Effects," Manchester School, University of Manchester, vol. 77(1), pages 65-81, January.
    12. Stephen J. Redding, 2010. "The Empirics Of New Economic Geography," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 297-311, February.
    13. Redding, Stephen J., 2016. "Goods trade, factor mobility and welfare," Journal of International Economics, Elsevier, vol. 101(C), pages 148-167.
    14. Stephen J. Redding & Esteban Rossi-Hansberg, 2017. "Quantitative Spatial Economics," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 21-58, September.
    15. 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.
    16. Brülhart, Marius & Carrère, Céline & Trionfetti, Federico, 2012. "How wages and employment adjust to trade liberalization: Quasi-experimental evidence from Austria," Journal of International Economics, Elsevier, vol. 86(1), pages 68-81.
    17. De Benedictis Luca & Vicarelli Claudio, 2005. "Trade Potentials in Gravity Panel Data Models," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-33, September.
    18. Gabriel M. Ahlfeldt & Arne Feddersen, 2010. "From periphery to core: economic adjustments to high speed rail," Working Papers 2010/38, Institut d'Economia de Barcelona (IEB).
    19. Takatoshi Tabuchi & Kristian Behrens & Andrea R. Lamorgese, 2004. "Testing the Home Market Effects in a Multi-country World: The Theory," Econometric Society 2004 Far Eastern Meetings 595, Econometric Society.
    20. Julio Martinez-Galarraga & Daniel A. Tirado & Rafael González-Val, 2015. "Market potential and regional economic growth in Spain (1860–1930)," European Review of Economic History, Oxford University Press, vol. 19(4), pages 335-358.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecj:ac2004:127. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F. Baum (email available below). General contact details of provider: https://edirc.repec.org/data/resssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.