Unit Values, Unit Labor Costs and Trade Performance in Four Central European Countries

Gábor Békés, Balazs Murakozy, Zsuzsa Munkacsi () and Gabor Oblath ()
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Gabor Oblath: Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences

No 1329, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: Our paper, relying on product and industry level data, analyses factors behind divergences in aggregate export price changes in four Central European countries, Poland, Hungary, Czech Republic and Slovakia. We focus on exports to Germany, their largest trading partner and observe the period 2000-2010. As our hypothesis is that divergence in changes may be explained by convergence in levels, we construct relative level indices of export unit values (UVs, as proxies of export prices) and unit labor costs (ULCs), based on the COMEXT and EU KLEMS databases, respectively. By merging the relative level indices with trade performance indicators (export volumes, market shares, extensive and intensive margins), we investigate the relation between UVs and ULCs, their changes, as well as their respective impact on trade performance. Our results suggest that (i) there is convergence in the four countries' export UV levels, (ii) changes in UVs were positively correlated with changes in ULCs, (iii) a higher UV increase was associated with lower growth in export volume, (iv) the level of ULC and that of labor productivity does not show convergence, but the level of labor costs and wage shares do. The results indicate that our approach helps understanding factors contributing to changes in UVs, as well as trade performance of countries. However, to reach more general results, the approach should be extended to more countries and markets.

Keywords: export price indices and unit values; unit labor costs; price level convergence; export performance (search for similar items in EconPapers)
JEL-codes: F14 F16 (search for similar items in EconPapers)
Pages: 79 pages
Date: 2013-09
New Economics Papers: this item is included in nep-eur and nep-tra
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