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

Marius Brülhart, Celine Carrere and Federico Trionfetti

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

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 (search for similar items in EconPapers)
JEL-codes: F15 R11 R12 (search for similar items in EconPapers)
Pages: 29 pp. + tables and figures
Date: 2011-06
New Economics Papers: this item is included in nep-geo, nep-int and nep-lab
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Published in Journal of International Economics, 86(1), January 2012, pp. 68-81

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Related works:
Journal Article: How wages and employment adjust to trade liberalization: Quasi-experimental evidence from Austria (2012) Downloads
Working Paper: How Wages and Employment Adjust to Trade Liberalization: Quasi-Experimental Evidence from Austria (2012) Downloads
Working Paper: How wages and employment adjust to trade liberalization: Quasi-experimental evidence from Austria (2012) Downloads
Working Paper: How Wages and Employment Adjust to Trade Liberalization: Quasi-Experimental Evidence from Austria (2011) Downloads
Working Paper: How Wages and Employment Adjust to Trade Liberalization: Quasi-Experimental Evidence from Austria (2011) Downloads
Working Paper: How Wages and Employment Adjust to Trade Liberalization: Quasi-Experimental Evidence from Austria (2011) Downloads
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