Importing Jobs or Exporting Firms? A Close Look at the Labour Market Implications of Italy's Trade and Foreign Direct Investment Flows
European Commission; Centre for Economic Policy Research (CEPR)
Cattaneo University - LIUC ; CESPRI / KITeS Bocconi University
University of Milan - Department of Economics, Management and Quantitative Methods (DEMM); Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy
Anna M. Falzoni
Universita di Bergamo
CEPR Discussion Paper Series Number 2033
International economic integration is often blamed for the deteriorating fortunes of unskilled workers in industrial countries. We look at the labour market impact of trade and foreign direct investment in the case of Italy. Our empirical framework allows for trade, technology and factor supply effects. We find that international trade did not contribute to Italy's labour market problems. Indeed, given that Italy holds quite a distinct pattern of trade specialization, compared to other industrialized countries, international integration as reflected in falling import prices may have boosted the demand for labour there. We also argue that the inability of the Mezzogiorno's economy to adjust to the changing international environment is one of the main stumbling blocks in Italy's economy. Finally, we find that greater firm's mobility may have weakened the power of trade unions and contributed to wage moderation.
JEL Classification: F16, F23
Date posted: March 30, 1999
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