Focus on European Economic Integration Q1/09

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• Focus on European Economic Integration Q1/09 (PDF, 2.8 MB) March 2009.

Studies and Analyses

• Trade and Wages: Winning and Losing Sectors in the Enlarged European Union (PDF, 508 kB) Polgár, Wörz. Polgár, Wörz – Focus on European Economic Integration Q1/09 This paper contributes to the abundant but as yet inconclusive literature on the effect increased openness to trade has on wages by presenting an analysis of industry-level data for 21 service and manufacturing industries in 25 EU countries covering the period from 1995 to 2005. By applying a cross-country and industry-specific approach, it is possible to control for unobserved heterogeneity at both country and industry levels. While we are able to identify some – often resource-based – industries as winners of increased trade integration, we find very few and comparatively small effects in general. The relation between trade and wages tends to be weaker in Western European countries (EU-15) than in the EU Member States in Central and Eastern Europe (EU-10). At the same time, greater trade openness appears to have increased the influence wage levels abroad – as opposed to productivity – have on wage setting in the EU-15. By contrast, wages in the EU-10 have become less responsive to foreign wages and more realigned with productivity developments as a result of trade openness. en Mar 31, 2009, 12:00:00 AM

• The Distributional Effects of Trade on Austrian Wages (PDF, 501 kB) Pointner. Pointner – Focus on European Economic Integration Q1/09 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. en Mar 31, 2009, 12:00:00 AM

• Rationality of Post-Accession Migration (PDF, 634 kB) Budnik. Budnik – Focus on European Economic Integration Q1/09 Given large-scale Polish migration to the U.K. following EU enlargement in 2004, this study evaluates market efficiency in sorting Polish-born workers to the locations offering the highest returns to their skills. To establish whether Polish workers that emigrated to the U.K. did so on rational premises, wage regressions are run to identify the wage gains individuals may have expected to realize when migrating and when staying; and the Heckman (1979) self-selection model is used to tie up the migration decision with the decision to work and to identify returns to unobservable skills (e.g. motivation). Whereas the results support the rationality of migration from Poland to the U.K. (those who left gained in nominal and real terms), they are less conclusive about the optimality of staying (some of those who stayed might have earned more abroad). The outcomes suggest that the anticipated wage gains do not fully explain the intensity of observed migration and underline the importance of including nonincome factors, i.e. social costs, in exploring post-accession migration. en Mar 31, 2009, 12:00:00 AM

• Southeastern Europe: Financial Deepening, Foreign Banks and Sudden Stops in Capital Flows (PDF, 511 kB) Winkler. Winkler – Focus on European Economic Integration Q1/09 Over recent years, rapid financial deepening has been observed in Southeastern Europe. While originally welcomed as a sign of financial development spurring growth, macrofinancial stability concerns emerged as inflationary pressures rose and current account deficits came close to or surpassed double-digit levels. However, until autumn 2008, stability risks remained contained. Since then, Southeastern European countries appear to have been confronted with a sudden stop of capital flows, creating an Asian-crisis-like scenario. While this seems to vindicate warnings that financial deepening had taken an unsustainable course, the drying up of capital flows has largely been reflecting contagion from the financial turmoil in mature markets. Against this background, the most recent events indicate that the strategy of fostering financial development based on fit and proper foreign banks does not automatically provide a guarantee for financial stability. en Mar 31, 2009, 12:00:00 AM

• 63rd East Jour Fixe – Financial Deepening and Macrofinancial Stability in Southeastern Europe (PDF, 135 kB) Reininger, Gardó, Wörz – Focus on European Economic Integration Q1/09 en Mar 31, 2009, 12:00:00 AM

• The OeNB’s Conference on European Economic Integration 2008 – The Integration of European Labor Markets (PDF, 220 kB) Pointner, Schmidt-Dengler, Schreiner – Focus on European Economic Integration Q1/09 en Mar 31, 2009, 12:00:00 AM

• SUERF Workshop and Special OeNB East Jour Fixe – Current Trends in the Russian Financial System (PDF, 138 kB) Barisitz, Eller, Keppel – Focus on European Economic Integration Q1/09 en Mar 31, 2009, 12:00:00 AM

• Olga Radzyner Award for Scientific Work on European Economic Integration (PDF, 67 kB) Focus on European Economic Integration Q1/09 en Mar 31, 2009, 12:00:00 AM