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The effect of FDI and foreign trade on wages in the Central and Eastern European Countries in the post-transition era: a sectoral analysis for the manufacturing industry

The effect of FDI and foreign trade on wages in the Central and Eastern European Countries in the post-transition era: a sectoral analysis for the manufacturing industry

Onaran, Özlem ORCID: 0000-0002-6345-9922 and Stockhammer, Engelbert (2008) The effect of FDI and foreign trade on wages in the Central and Eastern European Countries in the post-transition era: a sectoral analysis for the manufacturing industry. Structural Change and Economic Dynamics, 19 (1). pp. 66-80. ISSN 0954-349X (doi:https://doi.org/10.1016/j.strueco.2007.11.003)

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Abstract

The aim of this paper is to estimate the effect of FDI and trade openness on average sectoral wages in the manufacturing industry in the CEECs in the post-transition era. We utilize a cross-country sector-specific econometric analysis based on one-digit level panel data for manufacturing industry in the Czech Republic, Hungary, Poland, Slovakia, and Slovenia for the period of 2000–2004. The results suggest that in the short run, productivity has a weak effect on wages, unemployment a strong one, FDI a positive one that is driven mostly by the capital intensive and skilled sectors, and international trade none. In capital-intensive sectors the effect of productivity seems stronger than in labor intensive ones, and the effect of unemployment seems stronger in unskilled sectors then in skilled ones. In the medium-run, the effects of productivity remain modest and that of unemployment stronger. Interestingly, the effect of FDI turns negative. Exports have a negative effect on wages and imports a positive one. However this negative effect can also be an indicator of inverse causality, and should be interpreted cautiously

Item Type: Article
Additional Information: [1] Published in Structural Change and Economic Dynamics, Volume 19, Issue 1, (March 2008) - Special Issue Relocation of Production to Central and Eastern Europe: Who Gains and Who Loses? Edited by Wilfried Altzinger and Michael Landesmann.
Uncontrolled Keywords: openness, European integration, wage bargaining, CEECs
Subjects: H Social Sciences > HB Economic Theory
Pre-2014 Departments: School of Business
Related URLs:
Last Modified: 14 Oct 2016 09:22
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
URI: http://gala.gre.ac.uk/id/eprint/9037

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