Labor market effects of foreign direct investment and trade in Central and Eastern Europe

  • Stockhammer, Engelbert-Richard (PI - Project head)
  • Onaran, Özlem (Researcher)
  • Ramskogler, Paul (Researcher)

    Project Details

    Financing body

    WU Vienna (earmarked funds)


    Recent evidence suggests that the integration of Central and Eastern European countries (CEEC) into the Western European economic area has so far failed to lead to converging living standards (Vaughan-Whitehead 2003, Paoli and Parent-Thirion 2003). In contrast, most studies expect Eastern enlargement to bring about increasing welfare in the new member states in the foreseeable future, though the time horizons of such predictions differ. Essentially, the optimism of these analyses is grounded in the perceived welfare effects of two key factors: the gains from trade openness, and from foreign direct investment (FDI). However, while there is a rich literature on the factors and prospects of convergence in per capita GDP terms, a more precise understanding of the distributional impact of free trade and FDI requires a great deal of further conceptual clarification and empirical testing. The proposed project aims at exploring the social - more specifically wage and employment - effects of open trade and FDI in the new EU member states, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia, and two membership candidates, Bulgaria and Romania.

    The project proposes to analyse these effects at two levels. Firstly, it undertakes a quantitative analysis of the sector-specific impact of FDI and export-orientation on wages and employment. This will be done by means of an econometric investigation performed by the WU part of the research group. Secondly, since the explanatory power of standard quantitative methods is limited by the scarcity of reliable and comparable statistical data, the econometric study will be complemented by qualitative case studies of the social effects of FDI and export orientation in specific industries. These case studies of major export sectors, specifically textiles and apparel, electronics, and car manufacturing, will be prepared by the CEU part of the research group.
    Effective start/end date1/03/0528/02/06

    Collaborative partners

    Austrian Classification of Fields of Science and Technology (OEFOS)

    • 502046 Economic policy
    • 502047 Economic theory
    • 502053 Economics