The Distributional Effects of Trade on Austrian Wages

Wolfgang Pointner ()
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Wolfgang Pointner: Oesterreichische Nationalbank

Focus on European Economic Integration, 2009, issue 1, 36-56

Abstract: To shed some light on the impact of the growing international division of labor on wages, this paper aims to assess the effect of trade on wage distribution in the Austrian manufacturing industry by estimating quantile wage regressions. In the regressions, we control for the share of imports and exports in the total production of industrial sectors and take into account the wage level of trading partners. A decomposition of wage changes from 1996 to 2002 shows that, while imports from low-wage countries had a dampening effect on manufacturing wages in Austria, wage growth was dampened above all by exports to high-wage countries. This could be interpreted as evidence for the “bazaar economy” hypothesis.

Date: 2009
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