Discussion paper

DP8130 Globalization and Inflation in Europe

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% of European market share, producer prices decrease about 2%. In contrast, no effect is present for import competition from low-wage countries in Central and Eastern Europe.


Fischer, A, R Auer and K Degen (2010), ‘DP8130 Globalization and Inflation in Europe‘, CEPR Discussion Paper No. 8130. CEPR Press, Paris & London. https://cepr.org/publications/dp8130