Wage response to global production links: evidence for workers from 28 European countries (2005-2014)

Abstract

Using rich individual level data on workers from 28 European countries, this study provides the first so extensive cross-country assessment of wage response to global production links within GVC in the period 2005-2014. Unlike the other studies, the authors (i) address the importance of backward linkages in globally integrated production structures (capturing imports of goods and services needed in any stage of the production of the final product); (ii) measure occupational task profile of workers with country-specific indices of routinisation; (iii) compare the impact of global production links on wages between workers from Western, Central-Eastern and Southern Europe; employed in manufacturing and non-manufacturing sectors; (iv) account for direct and indirect dependence on GVC imports from developing and high income countries. The study takes into account the potential endogeneity issues. The results suggest that global import intensity of production exhibits negative pressure on wages in Europe. This effect concerns mainly workers from Western Europe employed in manufacturing and is driven by production links with non-high income countries but our counterfactual estimates suggest that the effect is economically small.