Real Wages and Imports

A number of models are based on the idea that wages are shaped by domestic and international forces, but literature on international trade and the labour market performance highlight opposing views and evidence. The main issue in this paper is to investigate, from an empirical point of view, a possible long-run relationship between imports and wages at the macro level in Italy in the period 1976.1-2001.1, partly along the lines of Zhu (1996). We employ cointegration tests and, specifically, we suggest to consider a relevant break, the exit of Italy from the EMS. The model is estimated and tested with respect to its long-run and dynamic properties. We conclude in favour of a systematic long-run cointegrating relationship, between “real hourly wage rate in manufacturing” and “imports of manufactured goods”, with causal effects running bidirectionally.