International Trade
Austria and the East

The fall of the iron curtain changed international economic relations in Central Europe completely: mass migration of labour from the East, as well as enhanced competition by producers benefiting from very low labour costs in the East, were widely feared to lead to substantial labour market problems in the neighbouring countries. Austria experienced disproportionately large bilateral trade creation with these countries, and hence serves as a good benchmark case for other countries' experience.

In Discussion Paper No. 1168, Karl Aiginger, Research Affiliate Rudolf Winter-Ebmer and Josef Zweimüller take a closer look at the impact that this trade growth has had on the Austrian labour market. To differentiate as far as possible between different segments of the labour market, the authors concentrate on unemployment experience and wage growth for a panel of individual workers in Austrian industry. The results show rather small employment effects, while the impact on wage growth is more pronounced with interesting modifications for mobile and immobile workers. The results confirm the view that opening EU markets to the East would have no strong consequences for labour markets in the West. The conclusion needs to be weighed against the fact that to date free trade has been limited by restrictions in such sectors as agriculture and textiles.

East European Trade and the Austrian Labour Market
Karl Aiginger, Rudolf Winter-Ebmer and Josef Zweimüller

Discussion Paper No. 1168, May 1995 (HR/IT)