Filip Abraham

Price and Wage Setting in an Integrating Europe: Firm Level Evidence

Europe has witnessed the last decade an accelerated process of economic integration. Trade barriers were removed, the euro was introduced and ten new member states entered the European Union. Economic integration is likely to have an impact on both labor and product markets. Unlike most other papers, that focus on product and labor markets separately, we look at the link between globalization and product and labor market imperfections simultaneously. To this end, we rely on a rich panel of manufacturing firms in Belgium, a small open economy. We find that union bargaining power is higher in sectors characterized by high price cost margins. Moreover, ignoring imperfections on the labor market, leads to an underestimation of product market power. Concerning the influence of globalization, our main findings are that both price cost margins and union bargaining power are typically lower in sectors that are subject higher international competition. This result is especially true for competition from low wage countries.

Regional adjustment and wage flexibility in the European Union

Abstract This paper evaluates the role of wage flexibility in European Union (EU) regional labor market adjustment to region-specific and aggregate shocks. A stylized theoretical model is developed which integrates interregional migration, spill-over effects from national to regional wage determination, and regional agglomeration effects. The wage equations of this model are estimated using the EU regional database.

Export Promotion Via Official Export Insurance

Proponents of free trade argue that export promotion distorts competition and undermines the multilateral trade system. In most countries export insurance is provided by the government and, consequently, is driven more by a broad range of policy objectives than purely insurance principles. This paper, however, shows that export promotion does not necessarily imply trade distortions and that most export destinations do not benefit from insurance premium subsidies. A significant policy implication of these findings is that the WTO and the EU are correct not to banish completely official export insurance.

Does the Opening of Central and Eastern Europe Threaten Employment in the West

T HE opening up of Central and Eastern Europe posed a profound economic challenge for the European Union (EU). Virtually overnight EU countries were confronted with a group of neighbouring countries with structurally very different economic conditions. The economic system of the Central and Eastern European Countries (CEEC) was built on nearly 50 years of centrally based planning and even more important was the huge gap in income, wages and productivity. Compared to the gradual process that characterises post-war European integration, the demise of the Communist legacy represented an abrupt shock. After a deep recession in the early nineties, several transition countries are now doing well. If this trend continues some of the CEEC including Poland, Hungary and the Czech Republic will turn into fast growing, high performing countries. In Western Europe this prospect is not greeted with enthusiasm by those policymakers, business and trade union representatives who fear the competition of the newly emerging economies in Central and Eastern Europe. Not surprisingly, the adjustment to this new reality has become a key issue on Europe’s policy agenda, not in the least because Poland, Hungary, the Czech Republic, Slovenia and Estonia have started negotiations to join the EU in the near future. Most of the policy concerns relate to employment. Eastern Europe represents a large reservoir of low wage labour in the EU’s backyard. There is a concern that

Can Belgian firms cope with the Chinese dragon and the Asian tigers ? The export performance of multi-product firms on foreign markets

Exporting firms are affected in many ways by competition on foreign markets. This paper focuses on the impact of Asian competition on the bilateral export performance of Belgian firms, controlling for firm level as well as destination-market characteristics. Export performance is measured in several ways, including the export intensity, the variety and quality of trade as well as the export intensity growth. Export performance appears to differ substantially across firms, across sectors and across destination markets. Our overall results indicate that both the export intensity and variety of Belgian firms’ exports are reduced by Asian competition. Especially the competitive pressure caused by mainland China and Hong Kong is strong. The competitive pressure is intense in labour-intensive sectors but also felt in a wide range of activities with a higher value added. Belgian exporters cope with foreign competition by following a variety-expansion or a quality-upgrading strategy.

Sectoral employment effects of trade and productivity in Europe

The impact of trade and technology in the European case is assessed. A framework is developed which incorporates employment effects of (i) export expansion (ii) import competition and (iii) labour-saving productivity improvements. In this context, evidence is found for the hypothesis that international trade induces adjustments in technology.

A Policy Perspective on European Unemployment

This paper focuses on three major themes in the policy debate on European unemployment. A first issue concerns the causes of unemployment. We point to the diversity of the unemployment performance in Europe and plead for a policy approach which takes into account the interdependence between employment, labour costs and social protection. As a second major theme, we evaluate existing EU policies. While a EU social dimension is gradually developing, the European level is far from providing a comprehensive policy framework at this stage. A third issue relates to the national policy dimension and is linked to Europes quest for a third way. We compare the corporatist and competitive labour market approach. Copyright 1999 by Scottish Economic Society.

Trade integration in the twentieth century: What does Belgian history tell us?

Trade Integration in the Twentieth Century: What Does Belgian History Tell Us? — This paper studies globalization, protection and the impact of regional trading blocs in the twentieth century. The authors take the perspective of a small open core country in Europe. Using a gravity approach, it can be shown that trade integration in Europe followed a U-shaped pattern during the last hundred years. Moreover, the similarity between the gold standard and the current period is striking. Finally, evidence is found of a strong EC effect, in particular among EC6 countries.ZusammenfassungHandelsintegration im 20. Jahrhundert. Was lehrt uns die belgische Geschichte? — Die Verfasser untersuchen die Globalisierung, Protektion und Wirkung regionaler Handelsblöcke im 20. Jahrhundert. Sie tun dies unter dem Blickwinkel eines kleinen offenen europäischen Kernlandes. Unter Verwendung eines Gravitationsansatzes kann gezeigt werden, daß die Handelsintegration in Europa während der letzten hundert Jahre einem U-förmigen Verlauf folgte. Außerdem ist die Ähnlichkeit zwischen dem Goldstandard und der gegenwärtigen Periode auffallend. Schließlich gibt es eine Evidenz für einen starken EG-Effekt, insbesondere unter den ersten sechs EG-Ländern.

Social protection and regional convergence in a European Monetary Union

This paper addresses convergence in social protection and GDP in a European Economic and Monetary Union. We evaluate the impact of recently proposed EC social minimum requirements on regional convergence within the EC. Subsequently, we analyze a system of differentiated social norms as a means of raising social protection in countries with lower social standards.

Chinese competition in OECD markets: impact on the export position and export strategy of OECD countries

China has been rapidly increasing the exports of manufactured products to OECD markets. In this paper we obtain evidence that the rise of China decreases the export market shares of OECD countries in other OECD markets. We also assess strategies of OECD countries to respond to increasing Chinese competition. OECD countries that upgrade the quality of their export goods strengthen their export position. The evidence for a strategy of variety expansion is less convincing. These conclusions hold for total manufacturing trade. At the sectoral level, the impact of variety expansion and quality upgrading appears to be very heterogeneous.