Real Unit Labour Costs in Eurozone Countries: Drivers and Clusters

Javier Ordóñez, Hector Sala and José Silva

No 8258, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine the trajectories of the real unit labour costs (RULCs) in a selection of Eurozone economies. Strong asymmetries in the convergence process of the RULCs and its components – real wages, capital intensity, and technology – are uncovered through decomposition and cluster analyses. In the last three decades, the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) succeeded in reducing their RULCs by more than their northern partners. With the exception of Ireland, however, technological progress was weak; it was through capital intensification that periphery economies gained efficiency and competitiveness. Cluster heterogeneity, and lack of robustness in cluster composition, is a reflection of the difficulties in achieving real convergence and, by extension, nominal convergence. We conclude by outlining technology as the key convergence factor, and call for a renewed attention to real convergence indicators to strengthen the process of European integration.

Keywords: capital intensity; real wages; Eurozone; real unit labour costs; technology (search for similar items in EconPapers)
JEL-codes: F43 F62 O47 O52 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2014-06
New Economics Papers: this item is included in nep-eec, nep-lab and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published - published in: IZA Journal of European Labor Studies, 2015, 4:15, 1-19

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Related works:
Journal Article: Real unit labour costs in Eurozone countries: drivers and clusters (2015)
Working Paper: Real unit labour costs in Eurozone countries: Drivers and clusters (2015)
Working Paper: Real unit labour costs in Eurozone countries: Drivers and clusters (2014)
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