Shedding Light on Price‐ and Non‐Price‐Competitiveness Determinants of Foreign Trade in the Four Largest Euro‐Area Countries

31 Pages Posted: 6 Jul 2016

Date Written: August 2016

Abstract

Since the mid‐2000s standard price‐competitiveness indicators for euro‐area countries have recently provided conflicting signals, particularly in Italy. The manufacturing unit labor cost (ULCM)‐based indicator reports a major competitiveness loss in Italy. Owing to the internationalization of production processes and to the fading representativeness of labor on overall costs we argue that price‐based measures are more appropriate than those based on ULCMs to assess external competitiveness and play a more important role in explaining export growth. Measuring non‐price competitiveness and considering global value chains are also crucial to correctly identify the determinants of trade flows in the four largest euro‐area countries.

Suggested Citation

Giordano, Claire and Zollino, Francesco, Shedding Light on Price‐ and Non‐Price‐Competitiveness Determinants of Foreign Trade in the Four Largest Euro‐Area Countries (August 2016). Review of International Economics, Vol. 24, Issue 3, pp. 604-634, 2016. Available at SSRN: https://ssrn.com/abstract=2804828 or http://dx.doi.org/10.1111/roie.12225

Claire Giordano (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Francesco Zollino

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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