Absolute cost advantage and sectoral competitiveness: Empirical evidence from NAFTA and the European Union

Fahd Boundi-Chraki and Ignacio Perrotini-Hernández
Authors registered in the RePEc Author Service: Fahd Boundi Chraki

Structural Change and Economic Dynamics, 2021, vol. 59, issue C, 162-173

Abstract: Following the theory of absolute cost advantage, the present study aims to verify the hypothesis that, during 2000-2014, the real effective exchange rates of the United States and German manufacturing sectors vis-à-vis their North American and European partners, respectively, have been governed by the relative vertically integrated unit labour costs. To this purpose, the second generation of panel cointegration techniques to control for both cross-sectional dependence and slope heterogeneity is applied in our empirical analysis. The long-run equations are estimated by the mean group, the common correlated effects mean group, and the augmented mean group. The findings suggest that the cost-competitiveness of both US and German manufacturing sectors is positively associated with the decrease in the relative vertically integrated unit labour costs over the 2000-2014 period.

Keywords: Classical political economy; Real exchange rates; Competition; European and North American countries; Panel cointegration techniques (search for similar items in EconPapers)
JEL-codes: J30 O24 O51 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:59:y:2021:i:c:p:162-173

DOI: 10.1016/j.strueco.2021.08.020

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