A note on export openness and regional wage disparity in Central and Eastern Europe Peter Egger 1,2 , Peter Huber 2 , Michael Pfaffermayr 1,2 1 Department of Economics, University of Innsbruck, Universita¨tsstrasse 15, 6020 Innsbruck, Austria (e-mail: peter.egger@uibk.ac.at) 2 Austrian Institute of Economic Research, WIFO, P.O. Box 91, 1103, Vienna, Austria Received: December 2002/Accepted: January 2004 Abstract. This paper extends the empirical literature on the effects of trade liberalization on regional disparities within a country. Studying the case of the Central and Eastern European countries, we find significant convergence of real wages in Poland and Bulgaria, only. Furthermore, countries with a faster growing export openness in the period 1991–1998 experienced larger increases in their regional disparities. Especially, intermediate goods trade seems to have been a main driving force. Our estimates suggest that the long run impact of rising intermediate goods export openness in the last decade was a 23% increase in the average economy’s variance of real wages. JEL classification: R23, F15, J31 1. Introduction The tendencies to liberalize trade in the last decades have led to a re-emergence of interest in the potential effects of trade on regional disparities within a country. ‘‘New economic geography’’ models (Krugman 1991) have drawn attention to the fact that in the presence of (internal and external) increasing returns and labor migration, forward and backward linkages be- tween upstream and downstream industries (Venables 1996), or simply factor accumulation in the presence of externalities (Baldwin 1999), trade liberal- ization may lead to increased disparities across countries. Recently, Crozet and Koenig-Soubeyran (2002), Fujita et al. (Chapt. 18, 1999), Haaparanta (1998), Krugman and Livas (1996), Monfort and Nicolini (2002), Paluzie (1999), and Villar (2001) shifted the focus to regional disparities within countries. In these models, trade liberalization potentially affects regional disparities within countries as producers either move closer to the border to secure market access to foreign countries or to the centre to benefit from a larger market. The economic geography models differ starkly, however, concerning their predictions. First, as pointed out by Venables (1996) even within the Ann Reg Sci (2005) 39:63–71 DOI: 10.1007/s00168-004-0202-0 The authors are grateful to two anonymous referees for their helpful suggestions.