DP1451 Relative Prices, Trade and Restructuring in European Industry

Author(s): Damien J Neven, Charles Wyplosz
Publication Date: August 1996
Keyword(s): European Labour Markets, Trade
JEL(s): F02, F11, J30
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1451

This paper explores the link between trade and European labour markets by using evidence on relative commodity prices and intra-sectoral skill levels at the NACE three-digit level for the four large EC countries and for the period 1976–90. We find that if the relative import prices of unskilled labour intensive sectors have not fallen significantly over time, substantial and varied restructuring is observed in those sectors. Defensive restructuring, involving upgrading of skills and expansion, is about as common as the contraction of employment and wages predicted by the Hecksher-Ohlin principle.