Working Paper
Globalization and inflation in Europe
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 percent of European market share, producer prices decrease about 2 percent. In contrast, no effect is present for import competition from low-wage countries in Central and Eastern Europe.
JEL Classification: F11; F12; F14; F16; F40;
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Bibliographic Information
Provider: Federal Reserve Bank of Dallas
Part of Series: Globalization Institute Working Papers
Publication Date: 2010
Number: 65
Pages: 43 pages
Note: Published as: Auer, Raphael, Kathrin Degen and Andreas M. Fischer (2013), "Low-wage Import Competition, Inflationary Pressure, and Industry Dynamics in Europe," European Economic Review 59: 141-166.