ADJUSTMENT TO GLOBALISATION: A STUDY OF THE FOOTWEAR INDUSTRY IN EUROPE



of developments in the footwear sector but highlight a number of key issues which are
apparent from an analysis of footwear but which do not often figure in general
discussions of globalisation. We concentrate upon how adjustment to globalisation has
taken place in those European countries which were major footwear producers at the
start of the 1970s and discuss the dichotomy of experiences across Europe. We start by
providing an overview of changes in trade flows which have affected the footwear
industry in Europe before proceeding to discuss the main changes in the industry which
are apparent over the last 20 years.

2.1 Globalisation and EU Trade in Footwear Products

Traditional trade theory, in the form of the Stolper-Samuelson theorem, suggests that
changes in the relative price of unskilled labour intensive products, such as footwear, lie
at the heart of traditional explanations of the link between trade, changes in relative
wages and structural adjustment. Much of the empirical literature on this issue has failed
to find convincing evidence that the price of products, such as footwear, has fallen
relative to the price of products skilled-intensive products, such as machinery
(Slaughter, 1998; Lawrence, 1996; Lucke, 1997; Anderton and Brenton, 1998).

One possible explanation for these results is that sectoral producer prices are unable to
capture the relevant trade shock faced by the industrialised economies because they are
too aggregated. Wood (1997, 1998), for example, argues that heterogeneity of goods in
standard statistical definitions of sectors and changes in quality over time (which maybe
correlated with the skill intensity of production) could engender substantial errors into
available producer price series. If sub-sectors within the industries are different, in terms of
requiring different amounts of skilled and unskilled labour, then more open trade may
reduce the prices of some goods but raise the prices of others, leaving the industry
aggregate price unchanged. This is clearly likely to be the case for footwear when thinking
of standardised mass-produced varieties and fashion sensitive high quality shoes, for
example. Ideally, one would use highly disaggregated series on producer prices to
address this issue, but unfortunately they are not available. Wood points instead to
changes in the prices of imports and exports, which do suggest a rising relative price of
skilled-intensive products in the 1980s (but not in the 1970s).



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