The Euro and Firm Restructuring

61 Pages Posted: 17 Dec 2009

See all articles by Matteo Bugamelli

Matteo Bugamelli

Bank of Italy

Fabiano Schivardi

Luiss Guido Carli - Department of Economics and Finance; Einaudi Institute for Economics and Finance (EIEF); Centre for Economic Policy Research (CEPR)

Roberta Zizza

Bank of Italy

Multiple version iconThere are 4 versions of this paper

Date Written: June 10, 2009

Abstract

We test whether and how the adoption of the euro, narrowly defined as the end of competitive devaluations, has affected member states’ productive structures, distinguishing between within and across sector reallocation. We find evidence that the euro has been accompanied by a reallocation of activity within rather than across sectors. Since its adoption, productivity growth has been relatively stronger in country-sectors that once relied more on competitive devaluations to regain price competitiveness. This effect is robust to potential omitted-variable bias and correlated effects. Firm-level evidence from Italian manufacturing confirms that low-tech businesses, which arguably benefited most from devaluations, have been restructuring more since the adoption of the euro. Restructuring has entailed a shift of business focus from production to upstream and downstream activities, such as product design, advertising, marketing and distribution, and a corresponding reduction in the share of blue collar workers.

Keywords: euro, devaluations, productivity growth, firm restructuring, skill intensity

JEL Classification: F33, J24, L16, O47

Suggested Citation

Bugamelli, Matteo and Schivardi, Fabiano and Zizza, Roberta, The Euro and Firm Restructuring (June 10, 2009). Bank of Italy Temi di Discussione (Working Paper) No. 716. Available at SSRN: https://ssrn.com/abstract=1523201 or http://dx.doi.org/10.2139/ssrn.1523201

Matteo Bugamelli (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Fabiano Schivardi

Luiss Guido Carli - Department of Economics and Finance ( email )

Viale Romania 32
Rome, Rome 00187
Italy

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Roberta Zizza

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

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