Working Paper: CEPR ID: DP8130
Authors: Raphael Auer; Kathrin Degen; Andreas M. Fischer
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
JEL Codes: F11; F12; F14; F16; F40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Chinese market share (F61) | European producer prices (P22) |
| LWC growth in manufacturing (L69) | European producer prices (P22) |
| Chinese market share (F61) | European producer prices (UK) (N64) |
| Chinese market share (F61) | European producer prices (Sweden) (P22) |
| Chinese market share (F61) | European producer prices (Germany) (N64) |
| Chinese market share (F61) | European producer prices (Romania) (P22) |
| LWC imports (Y20) | European producer prices (P22) |