Trade Protection and Industry Wage Structure in Poland

42 Pages Posted: 21 Jun 2005

See all articles by Chor-Ching Goh

Chor-Ching Goh

The World Bank

Beata Smarzynska Javorcik

University of Oxford - Department of Economics; World Bank - Development Research Group (DECRG); Centre for Economic Policy Research (CEPR)

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Date Written: February 2005

Abstract

This study examines the impact of Poland's trade liberalization 1994-2001 on the industry wage structure. The liberalization was undertaken in preparation for Poland's accession to the European Union and was more pronounced in industries with larger shares of unskilled labor. Our analysis indicates that a decrease in an industry tariff was associated with higher wages being earned by workers employed in the industry, controlling for worker characteristics and geographic variables. The result is robust to including year and industry fixed effects, controlling for industry-level exports, imports, concentration, stock of foreign direct investment and capital accumulation. The finding is consistent with liberalization increasing competitive pressures, forcing firms to restructure and improve their productivity, which in turn translates into higher profits being shared with workers. It could also be potentially attributed to trade liberalization lowering the costs of imported inputs, which enhances firm profitability. The result holds when skilled workers are excluded from the sample, thus suggesting that reductions in trade barriers benefited the unskilled in terms of an increase in wages.

Keywords: Trade liberalization, wages, globalization, transition

JEL Classification: F16

Suggested Citation

Goh, Chor-Ching and Javorcik, Beata Smarzynska, Trade Protection and Industry Wage Structure in Poland (February 2005). Available at SSRN: https://ssrn.com/abstract=747486

Chor-Ching Goh (Contact Author)

The World Bank ( email )

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Beata Smarzynska Javorcik

University of Oxford - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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United Kingdom

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