IDEAS home Printed from https://ideas.repec.org/a/taf/pocoec/v23y2011i2p163-189.html
   My bibliography  Save this article

Trade liberalisation and economic geography in CEE countries: the role of FDI in the adjustment pattern of regional wages

Author

Listed:
  • Joze Damijan
  • Crt Kostevc

Abstract

This article studies the within-country regional effects of trade liberalisation in Central and Eastern European countries. CEE countries liberalised their trade with the European Union from the mid-1990s, while also receiving substantial foreign investment in the process. The first part of the period witnessed strong agglomeration effects in all of the countries, leading progressively to core-periphery type specialisation, and increasing regional wage differentials. In the second part of the period, however, there is notable evidence of a reversal in the relative regional specialisation, pointing to a U-shaped pattern of relative regional wages. Using the regional data for five CEE countries in 1990-2004 we argue that FDI inflows can be an important factor accelerating the observed regional adjustment process in the host country. First, we show that in four out of five CEE countries there is a significant U-shaped adjustment pattern of regional wages after they opened up to foreign trade. Second, we find robust econometric confirmation that in three of the five countries FDI has contributed significantly to faster adjustment of relative regional wages.

Suggested Citation

  • Joze Damijan & Crt Kostevc, 2011. "Trade liberalisation and economic geography in CEE countries: the role of FDI in the adjustment pattern of regional wages," Post-Communist Economies, Taylor & Francis Journals, vol. 23(2), pages 163-189.
    • Handle: RePEc:taf:pocoec:v:23:y:2011:i:2:p:163-189
    DOI: 10.1080/14631377.2011.570041
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/14631377.2011.570041
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/14631377.2011.570041?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
    2. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
    3. Brülhart, Marius, 1996. "Regional Integration, Scale Economies and Industry Location in the European Union," CEPR Discussion Papers 1435, C.E.P.R. Discussion Papers.
    4. Fidrmuc, Jan, 2004. "Labor mobility during transition : evidence from the Czech Republic," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 37(4), pages 437-450.
    5. Fidrmuc, Jan, 2004. "Labor mobility during transition : evidence from the Czech Republic," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 37(4), pages 437-450.
    6. repec:lic:licosd:22208 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrzej Cieślik & Bartłomiej Rokicki, 2013. "Regional wage determinants in Poland: the empirical verification of the NEG approach," Bank i Kredyt, Narodowy Bank Polski, vol. 44(2), pages 159-174.
    2. Matilde Cardoso & Pedro Cunha Neves & Oscar Afonso & Elena Sochirca, 2021. "The effects of offshoring on wages: a meta-analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(1), pages 149-179, February.
    3. Jakšić Saša, 2022. "Modelling CESEE Countries Export Dynamics: Global Vector Autoregressive Approach," Zagreb International Review of Economics and Business, Sciendo, vol. 25(2), pages 39-63.
    4. Andrzej Cieślik & Bartłomiej Rokicki, 2016. "European Integration and Spatial Wage Structure in Poland," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 107(4), pages 435-453, September.
    5. Ladislav Suhányi & Alžbeta Suhányiová & Jaroslava Kádárová & Jaroslava Janeková, 2023. "Relationships between Average Wages in the Manufacturing Sector and Economic Indicators of the Manufacturing Sector in the Region of Visegrad Group Countries," Sustainability, MDPI, vol. 15(5), pages 1-19, February.
    6. Curran, Louise & Zignago, Soledad, 2012. "EU enlargement and the evolution of European production networks," Research in International Business and Finance, Elsevier, vol. 26(2), pages 240-257.
    7. Jože P. Damijan & Sandra Damijan & Osiris Jorge Parcero, 2023. "Is There a Size Premium for Nations?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 3974-4016, December.

    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. repec:lic:licosd:22208 is not listed on IDEAS
    2. Dan Zheng & Tatsuaki Kuroda, 2013. "The impact of economic policy on industrial specialization and regional concentration of China’s high-tech industries," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(3), pages 771-790, June.
    3. Martin JANOTKA & Vladimir GAZDA, 2012. "Modelling Of Interregional Migration In Slovakia," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 7(1(19)/ Sp), pages 48-55.
    4. Junhua Li & Wenli Cheng, 2015. "Country Size, Economic Structure and Transaction Efficiency: An Asymmetric Spatial General Equilibrium Model of Income Differences across Nations," Monash Economics Working Papers 17-15, Monash University, Department of Economics.
    5. Toshiaki Takahashi & Hajime Takatsuka & Dao-Zhi Zeng, 2013. "Spatial inequality, globalization, and footloose capital," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(1), pages 213-238, May.
    6. 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.
    7. Stefan Gruber & Anna Soci, 2010. "Agglomeration, Agriculture, and the Perspective of the Periphery," Spatial Economic Analysis, Taylor & Francis Journals, vol. 5(1), pages 43-72.
    8. Nicole Madariaga & Sylvie Montout & Patrice Ollivaud, 2005. "Regional convergence and agglomeration in Argentina: a spatial panel data approach," Post-Print halshs-00193304, HAL.
    9. Pablo Sanguinetti & Iulia Traistaru & Christian Volpe Martincus, 2004. "Economic Integration and Location of Manufacturing Activities: Evidence from Mercosur," ERSA conference papers ersa04p609, European Regional Science Association.
    10. repec:cnb:ocpubv:as08 is not listed on IDEAS
    11. Volpe Martincus, Christian & Siedschlag, Iulia, 2010. "The Impact of South-South Preferential Trade Agreements on Industrial Development: An Empirical Test," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 25, pages 69-104.
    12. Volpe Martincus, Christian & Siedschlag, Iulia, 2010. "The Impact of South-South Preferential Trade Agreements on Industrial Development: An Empirical Test," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 25, pages 69-104.
    13. François Benaroya & Édouard Bourcieu & Marie-Laure Cheval, 2003. "Mondialisation des grands groupes : de nouveaux indicateurs ; suivi d'un commentaire de Marie-Laure Cheval," Économie et Statistique, Programme National Persée, vol. 363(1), pages 145-166.
    14. Khalil, Umair, 2017. "Do more guns lead to more crime? Understanding the role of illegal firearms," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 342-361.
    15. Díez-Esteban, José María & Farinha, Jorge Bento & García-Gómez, Conrado Diego, 2016. "The role of institutional investors in propagating the 2007 financial crisis in Southern Europe," Research in International Business and Finance, Elsevier, vol. 38(C), pages 439-454.
    16. Nam, Changwoo, 2016. "Impact of Corporate Tax Cuts on Corporate Investment," KDI Policy Forum 264, Korea Development Institute (KDI).
    17. Alperovych, Yan & Hübner, Georges & Lobet, Fabrice, 2015. "How does governmental versus private venture capital backing affect a firm's efficiency? Evidence from Belgium," Journal of Business Venturing, Elsevier, vol. 30(4), pages 508-525.
    18. Ensar Yılmaz & Zeynep Kaplan, 2022. "Heterogeneity of market power: firm-level evidence," Economic Change and Restructuring, Springer, vol. 55(2), pages 1207-1228, May.
    19. Nuno Carlos LEITÃO & Muhammad SHAHBAZ, 2012. "Migration and Tourism Demand," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(567)), pages 39-48, February.
    20. Geoffrey Barrows & Hélène Ollivier & Ariell Reshef, 2023. "Production Function Estimation with Multi-Destination Firms," CESifo Working Paper Series 10716, CESifo.
    21. Vasco Leite & Sofia Castro & João Correia-da-Silva, 2009. "The core periphery model with asymmetric inter-regional and intra-regional trade costs," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 8(1), pages 37-44, April.
    22. Corsetti, Giancarlo & Martin, Philippe & Pesenti, Paolo, 2007. "Productivity, terms of trade and the `home market effect'," Journal of International Economics, Elsevier, vol. 73(1), pages 99-127, September.

    More about this item

    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:taf:pocoec:v:23:y:2011:i:2:p:163-189. 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CPCE20 .

    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.