Varieties, Jobs and EU Enlargement

Tito Boeri and Joaquim Oliveira Martins

No 301, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Two key factors that have so far allowed fast growing economies of central and eastern Europe to cope with their external constraint have been I) the presence of relatively low unit labour costs and ii)the initial undervaluation of the exchange rate. The accession to the EU will inevitably reduce both sources of competitiveness of eastern European exports: real wages are likely to catch-up western European levels and current EU members are pushing these countries to enforce labour market and social regulations that will increase labour costs; moreover, stability of the exchange rate will be a precondition for the negotiations over the accession to proceed. Small open economies can grow faster than their neighbours without running into a balance of payment crises if they succeed in increasing the number of differentiated goods produced domestically. The multiplication of the number of varieties in these countries after trade liberalisation is an unambiguous sign that consumers coming from the empty shelves of the pre-transition era have a strong taste for varieties, and hence that new varieties can create their own demand. But the increase in the number of varieties will involve a furthering of the worker reallocation process as production is still largely concentrated in homogenous good and scale-intensive industries and enterprise density is significantly lower than in western Europe. This paper will start by reviewing the changing profile and orientation of trade in transitional economies of central and eastern Europe. Next, developments in enterprise density and the performance of greenfield vs. state and privatised firms will be reviewed in an attempt to assess barriers to the entry and growth of small business. Finally, numerical simulations of a model will be developed which enables to assess the likely impact on employment, unemployment and gross worker flows of reductions in start-up costs.

Keywords: transition economies; product variety; trade specialisation (search for similar items in EconPapers)
JEL-codes: F12 L11 P21 (search for similar items in EconPapers)
Pages: pages
Date: 2000-05-01
New Economics Papers: this item is included in nep-eec and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp301.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp301.pdf [302 Found]--> https://wdi.umich.edu/files/Publications/WorkingPapers/wp301.pdf)

Related works:
Journal Article: Varieties, Jobs and EU Enlargement (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wdi:papers:2000-301

Access Statistics for this paper

More papers in William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109. Contact information at EDIRC.
Bibliographic data for series maintained by WDI ().