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wiiw Seminar in
International Economics |
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Özlem Onaran, Vienna University of Economics and
Business Administration, and Istanbul Technical University
The Effect of FDI and Foreign Trade on Sectoral Manufacturing
Industry Wages in the Central and Eastern European Countries:
a Panel Data Analysis
(joint paper with Engelbert Stockhammer, Vienna University of
Economics and Business Administration, Dorothee Bohle, Central
European University, and Béla Greskovits, Central European University)
19 January 2006, 4 p.m. |
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| This paper
aims at exploring the effects of opening up through a division
of labour, which is determined by the international markets,
on labour’s purchasing power in the CEECs in the post-transition
era. The countries included are the Czech Republic, Hungary,
Poland, Slovakia, Slovenia, and the period of analysis is 2000
to 2004. The paper aims at testing whether integration into
the global economy has improved the bargaining power of labour
or, quite contrarily, whether it has intensified the distributional
conflict, and led to negative pressures over labour. The theoretical
contribution of the paper is to incorporate international trade
and foreign direct investment into the wage bargaining models.
Our focus in terms of trade is in particular the trade between
the EU15 and the new member states in order to reflect the impact
of the division of labour between the developed countries and
the periphery. We aim at answering the following questions:
Do FDI and international trade with the EU15 increase wages
in the CEECs after controlling for industrial properties, and
aggregate business cycle and labour market conditions? Do these
effects vary with respect to the capital and skill intensity
of the different groups of sectors? The results suggest that
the optimists’ expectations about the positive effects of openness
on wages and income distribution have not been observed; FDI
has a positive effect on wages only in the capital- and skill-intensive
sectors. Thus, the sectoral composition of development is not
neutral with respect to its effects on different classes. On
the part of the host country, these results call for a selective
strategy to attract FDI in sectors which facilitate skill upgrading
as well as climbing up the industrial ladder. On the part of
EU policy, a long-run perspective for an EU-wide public investment
programme in capital- and skill-intensive sectors in the new
member states is urgent to facilitate convergence regarding
not only technological levels but also income distribution. |
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