Trends in Disaggregated Import and Export Prices in Europe: Implications for the Trade and Wages Debate. CEPS Working Document No. 141, March 2000

Brenton, Paul and Pinna, Anna Maria. (2000) Trends in Disaggregated Import and Export Prices in Europe: Implications for the Trade and Wages Debate. CEPS Working Document No. 141, March 2000. [Working Paper]

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Abstract

We consider more carefully the evidence from traded prices (as proxied by unit values) concerning the transmission of the effects of globalisation to domestic labour markets. Using standard index number techniques we decompose changes in sectoral import and export unit values into movements due to changes in pure prices of the initial bundle of goods and changes due to upgrading of the bundle imported. Looking at the imports of selected European countries of textiles, clothing and footwear relative to engineering products we find evidence of strongly falling pure prices of the unskilled intensive products relative to the skilled products in the 1980s. This reinforces the view that import prices capture the impact of globalisation in terms of adverse relative price movements for products produced with the intensive use of unskilled labour. However, the trends are not common across all the unskilled sectors; footwear is clearly an exception. In the absence of detailed domestic data, we look for reactions by domestic firms to increased import competition in movements in the price and composition of exports. We find evidence of stiff price competition from imports being associated with similar movements in export prices and no support for the view that import competition from low-wage countries has led to upgrading of the quality of exports.

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