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Technology decreased wages of unskilled workers in Central and Eastern Europe, says research

Technology decreased wages of unskilled workers in Central and Eastern Europe, says research

"My research helps students understand the actual benefits of trade liberalization and also comprehend the challenges of living in a globalized world," says Díaz.

By Whitney Critten |  Student reporter

Trade tends to be beneficial for countries that engage in it, says Julián P. Díaz, PhD, assistant professor of economics. At the same time, it generates distributional effects that cause some people to win, while others lose.

His research on international trade and macroeconomics assesses the impact that trade has had on the transition economies of Central and Eastern Europe countries (CEE) that joined the European Union in 2004 and 2007. These countries transitioned from communist systems to market-oriented capitalist economies in a short span of time.

Díaz’s research on trade has been published in notable peer-reviewed journals, such as the Journal of Comparative Economics, the Southern Economic Journal, Economic Inquiry, and the Journal of International Money and Finance.

Here, he discusses his current research and why his findings are important for industry and Quinlan students.

What are you currently researching?

I am currently working on two projects with Sang-Wook (Stanley) Cho, a senior lecturer at the University in New South Wales in Sydney, Australia.

Our first project looks at what factors have impacted the recent changes in the skill premium—the difference between the wages of skilled and unskilled workers—in CEE economies, and determine whether trade has played a substantial role in its rise.

Our second project examines how trade increased in the three Baltic States: Estonia, Latvia, and Lithuania after they and their fellow CEE countries joined the European Union. In particular, we investigate what types of goods dominated the trade increases and how these countries were able to outperform other CEE countries.  

What are some key findings from your research?

One of the main findings from our first project is that the most important factor in the decline of the wages of unskilled workers is technological change in the form of computerization and automation.

Regarding our second line of work, we’ve found that the three Baltic States implemented aggressive and comprehensive trade liberalization reforms that greatly benefited their trade operations. We’ve also found that these countries increased their shares of  goods that were traded in very low volumes before opening, vastly outpacing the performance of other CEE economies in that dimension.

Similarly, the three Baltic States also experienced large increases in least-traded imports, which in turn benefits Baltic consumers because they now have a wider variety of products at their disposal.

Why is your research on trade of interest to the business community?

Our findings on the way trade expands after trade liberalization occurs showcases how it creates significant opportunities for producers to sell their products in new markets.

Why is your research important to Quinlan students?

My research—and the research of other prominent economists that I present in my classes—helps students understand the actual benefits of trade liberalization and also comprehend the challenges of living in a globalized world.

Moreover, given the findings that technological change seems to disproportionately benefit skilled workers (and hurt unskilled ones), I emphasize that the best way to prepare themselves for the future is to acquire a diverse and broad set of skills.