Wages,Skills, and Integration in Poland,Hungary and the Czech Republic: an Industry-level Analysis

This paper analyzes the manufacturing sector of Poland, Hungary, and the Czech Republic between 1993 and 2001 and provides a set of stylized facts regarding the changes occurring in the skill composition of the workforce and in the earning structure by skills, on one hand, and in trade flows and foreign presence through direct investment, on the other hand. All three countries have experienced sharp increases in earning inequality which have concerned almost all manufacturing industries; relative skilled employment has, instead, decreased in almost all Hungarian and Czech industrial branches, while showing the opposite trend in the Polish counterparts. At the same time, the three countries have reoriented and expanded their trade flows and modified the merchandise composition of both exports and imports in favour of high-tech and capital-intensive sectors and against more traditional industries. Foreign direct investment has acquired progressively more importance in the three economies and the high-tech sector – as well as chemicals and machineries – has significantly gained relevance on total stocks. Correlation analysis comes in favour of a prevalently vertical nature of multinational enterprises; moreover, trade flows are in general negatively correlated with relative wages and employment, whereas the sign of the relation between foreign direct investments and earning inequality is clearly positive in Poland only.