International Competitiveness: is the reduction of wages a solution? An evaluation of the Portuguese case

Elsa Vaz ()
Authors registered in the RePEc Author Service: Maria Paula Fontoura

CEFAGE-UE Working Papers from University of Evora, CEFAGE-UE (Portugal)

Abstract: The purpose of this paper is to analyse, for the case of Portugal, the effectiveness of wage reduction - a current proposal since 2011 ??to help the country to reverse the high public and external debt - in promoting the efficiency and international competitiveness of the economy. A static multi-sector and single-country general equilibrium model is used and data is collected from the GTAP7 Database. The model allows the measurement of changes by sector. The simulations performed show that extending the reduction of wages already deployed by the government in the public sector to the private sector leads to a positive impact on employment (both skilled and unskilled labour), production and volume of exports in all sectors except those that are R&D intensive, the latter having a low weight in the Portuguese economy. However, it is possible that the positive results in terms of external competitiveness are not sustainable, as the impact on productivity is negative, albeit small, for most sectors. There are also reasons for concern regarding the observed deterioration of the trade balance of most sectors, the exception being the traditional labour intensive sectors, which show good prospects in this respect.

JEL-codes: D24 D58 J38 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2013
New Economics Papers: this item is included in nep-cmp, nep-cse and nep-int
References: Add references at CitEc
Citations:

Downloads: (external link)
https://api.cefage.uevora.pt/assets/a10e2dca-c0fd-46e3-a4a8-76613ba66bb6 (application/pdf)

Related works:
Working Paper: International Competitiveness: is the reduction of wages a solution? An evaluation of the Portuguese case (2013)
Working Paper: International Competitiveness: is the reduction of wages a solution? An evaluation of the Portuguese case (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cfe:wpcefa:2013_04

Access Statistics for this paper

More papers in CEFAGE-UE Working Papers from University of Evora, CEFAGE-UE (Portugal) Contact information at EDIRC.
Bibliographic data for series maintained by Angela Pacheco ().