A Nation of Poets and Thinkers - Less so with Eastern Enlargement? Austria and Germany

By Dalia. Marin. 2004

168 citations recorded by the source corpus.

Many people in the European Union fear that Eastern Enlargement will lead to major job losses. More recently, these fears about job losses have extended to high skill labor and IT jobs. The paper examines with new firm level data whether these fears are justified for the two neighboring countries of Eastern Enlargement: Austria and Germany. We find that Eastern Enlargement leads to surprisingly small job losses, because jobs in Eastern Europe do not compete with jobs in Austria and Germany. Low cost jobs of affiliates in Eastern Europe help Austrian and German firms to stay competitive in an increasingly competitive environment. However, we also find that multinational firms in Austria and Germany are outsourcing the most skill intensive activities to Eastern Europe, taking advantage of cheap abundant skilled labor in Eastern Europe. We find that the firms' outsourcing activities to Eastern Europe are a response to a human capital scarcity in Austria and Germany which became particularly severe in the 1990s. Corporations' outsourcing of skill intensive firm activity to Eastern Europe has helped to ease the human capital crisis in both countries. We find that high skilled jobs transferred to Eastern Europe account for 10 percent of Germany's and 48 percent of Austria's supply of university graduates in the 1990s. We then discuss what can be done to address the skill exodus to Eastern Europe. We show that R&D subsidies do not work in economies with a skill crisis and we suggest liberalizing the movement of high skill labor with Eastern Enlargement.

Subfields: Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/54acc302a41a88ee2857f7d855e6a7388ffa0509

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Political Science and International Relations

Citations in the corpus

Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals (2005, unknown): “In Germany, employment at the parent firms increased over this period as well.”
Je t'aime, moi non plus : Bilateral opinions and international trade (2007, methodology): “Using firm-level data, Marin (2004) shows that the enlargement indeed lead to overall small net job losses in both countries over the transition period.”
Globalisation: the great unbundling(s) (2006, background): “Marin (2004) estimates that production relocation produced the loss of 90,000 jobs in Germany and 22,000 jobs in Austria, which represents 0.3 percent and 0.7 percent of total employment in the two nations respectively.”
A new international division of labor in Europe: Outsourcing and offshoring to Eastern Europe (2005, unknown): “8 These results are consistent with the fact that Austria is human capital poor relative to Eastern Europe and thus offshores the skill intensive stages of production to Eastern Europe, see Marin (2004), for its effect on the skill premium in Austria, see Lorentowicz, Marin, Raubold (2005).”
How Does Investing in Cheap Labour Countries Affect Performance at Home? France and Italy (2006, unknown): “…employment (Brainard and Riker, 1997a and 1997b; Braconier and Eckholm, 2002; Konigs and Murphy, 2006; Bruno and Falzoni, 2000; Blomström et al., 1997; Lipsey, 1999; Mariotti et al., 2003; Marin, 2004), productivity (Braconier et al., 2001; van Pottelsberghe de la Potterie and Lichtenberg, 2001).”
Foreign Direct Investment in Southeastern Europe: How (and How Much) Can Policies Help? (2005, background): “Marin (2004) finds that Austrian and German companies are outsourcing the most skill-intensive activities into Central and Southeastern European countries to take advantage of their relatively inexpensive skilled labor.”
Margins of Multinational Labor Substitution (2006, background): “These elasticities quantify the response of labor demand in one location to permanent wage changes at the same location or elsewhere.”