A note on export openness and regional wage disparity in Central and Eastern Europe

Abstract

This paper extends the empirical literature on the effects of trade liberalization on regional disparities within a country. Studying the case of the Central and Eastern European countries, we find significant convergence of real wages in Poland and Bulgaria, only. Furthermore, countries with a faster growing export openness in the period 1991–1998 experienced larger increases in their regional disparities. Especially, intermediate goods trade seems to have been a main driving force. Our estimates suggest that the long run impact of rising intermediate goods export openness in the last decade was a 23% increase in the average economy’s variance of real wages.