Globalization and Inflation in Europe

Andreas Fischer (), Raphael Auer and Kathrin Degen

No 8130, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: What is the impact of import competition from other low-wage countries (LWCs) on inflationary pressure in Western Europe? This paper seeks to understand 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, IV estimates predict that LWC import competition is associated with strong price effects. More specifically, when Chinese exporters capture 1% of European market share, producer prices decrease about 2%. In contrast, no effect is present for import competition from low-wage countries in Central and Eastern Europe.

Keywords: Comparative advantage; Globalization; Intra-industry trade (search for similar items in EconPapers)
JEL-codes: F11 F12 F14 F16 F40 (search for similar items in EconPapers)
Date: 2010-12
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Citations: View citations in EconPapers (10)

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Working Paper: Globalization and inflation in Europe (2010)
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