How Wages and Employment Adjust to Trade Liberalization: Quasi-Experimental Evidence from Austria

Details

Serval ID
serval:BIB_3B01A9C90C0D
Type
Report: a report published by a school or other institution, usually numbered within a series.
Publication sub-type
Working paper: Working papers contain results presented by the author. Working papers aim to stimulate discussions between scientists with interested parties, they can also be the basis to publish articles in specialized journals
Collection
Publications
Institution
Title
How Wages and Employment Adjust to Trade Liberalization: Quasi-Experimental Evidence from Austria
Author(s)
Brülhart M., Carrère C., Trionfetti F.
Institution details
Université de Lausanne - HEC - DEEP
Issued date
06/2011
Number
11.04
Genre
Cahiers de recherches économiques
Language
english
Number of pages
29
Abstract
We study the response of regional employment and nominal wages to trade liberalization, exploiting the natural experiment provided by the opening of Central and Eastern European markets after the fall of the Iron Curtain in 1990. Using data for Austrian municipalities, we examine differential pre- and post-1990 wage and employment growth rates between regions bordering the formerly communist economies and interior regions. If the "border regions" are defined narrowly, within a band of less than 50 kilometers, we can identify statistically significant liberalization effects on both employment and wages. While wages responded earlier than employment, the employment effect over the entire adjustment period is estimated to be around three times as large as the wage effect. The implied slope of the regional labor supply curve can be replicated in an economic geography model that features obstacles to labor migration due to immobile housing and to heterogeneous locational preferences.
Keywords
trade liberalization, spatial adjustment, regional labor supply, natural experiment
Create date
15/08/2012 14:14
Last modification date
20/08/2019 13:30
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