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Measuring quality and non-cost competitiveness at a country-product level

Francesco Di Comite

No 467, European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: This paper contributes to the ongoing debate on macroeconomic imbalances and external competitiveness by developing a set of indicators of export capability at a country-product level which can be used to complement the existing toolkit of instruments based mostly on unit labour costs and relative price levels. A micro-founded methodology is here proposed to extract information on the capacity of a country's exporters to compete abroad by combining trade and macroeconomic data. In particular, light is shed on two independent components of demand for a particular variety (country-product combination): markups-shifting "quality" and sales-boosting "non-cost competitiveness". Together with cost efficiency and information on foreign prices and consumption, these additional indicators may foster our understanding of the determinants of a country's external position, thus providing better guidance for policymaking.

JEL-codes: F12 F41 L11 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2012-11
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