Template-type: ReDIF-Paper 1.0
Author-Name: Raphael A. Auer
Author-Name-First: Raphael A.
Author-Name-Last: Auer
Author-Person: pau28
Author-Name: Kathrin Degen
Author-Name-First: Kathrin
Author-Name-Last: Degen
Author-Name: Andreas M. Fischer
Author-Name-First: Andreas M.
Author-Name-Last: Fischer
Author-Person: pfi23
Title: Low-Wage Import Competition, Inflationary Pressure,and Industry Dynamics in Europe
Abstract: What is the impact of import competition from low-wage countries (LWCs) on inflationary pressure in Europe? This paper examines 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, instrumental variable estimations predict that LWC import competition is associated with strong price effects. More specifically, when LWC exporters capture 1% of European market share, producer prices decrease by about 3%. In contrast, no effect is present for import competition from low-wage countries in Central and Eastern Europe. Next, decomposing the mechanisms that underlie the LWC price effect on European industry, we show that import competition has a pronounced effect on average productivity and only a muted effect on wages. Owing to the exit of firms and the increase in productivity, LWC import competition is shown to have substantially reduced employment in the European manufacturing sector.
Length: 66 pages
Creation-Date: 2011
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2011/working_paper_2011_09
File-Format: text/html
Number: 2011-09
Classification-JEL: F11, F12, F14, F16, F40
Keywords: Intra-industry trade, comparative advantage, globalization
Handle: RePEc:snb:snbwpa:2011-09