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Shedding Light on Price‐ and Non‐price‐competitiveness Determinants of Foreign Trade in the Four Largest Euro‐area Countries
Author(s) -
Giordano Claire,
Zollino Francesco
Publication year - 2016
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12225
Subject(s) - economics , representativeness heuristic , international economics , internationalization , unit (ring theory) , production (economics) , value (mathematics) , factor price , international trade , macroeconomics , microeconomics , psychology , social psychology , mathematics education , mathematics , machine learning , computer science
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.