The Effect of Trade on Employment and Wages in Italian Industry

Abstract

The paper analyses the labour market impact of international trade on the Italian manufacturing sector. Using data for a panel of manufacturing industries the effects of trade-induced changes in sales on employment and wages are investigated. The evidence suggests that the industry adjustment to demand shocks took place mainly through employment changes. However, increased exposure to foreign competition had a small effect on the Italian labour market, while technological change seems to have a major role in explaining the increase in unemployment.