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Export performance, price competitiveness and technology: Revisiting the Kaldor paradox

Claudius Graebner (), Philipp Heimberger () and Jakob Kapeller ()
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Claudius Graebner: Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria,

Authors registered in the RePEc Author Service: Claudius Gräbner ()

No 88, ICAE Working Papers from Johannes Kepler University, Institute for Comprehensive Analysis of the Economy

Abstract: We reassess the contemporary relevance of the "Kaldor paradox" (1978), according to which changes in relative unit labor costs as well as relative export prices are positively correlated with advanced countries' export shares in world markets - although conventional trade theory predicts the opposite. Using a sample of 34 OECD countries over the period 1980-2015, we find clear evidence for the continued relevance of Kaldor's paradox. Our findings indicate that the paradox can neither be resolved by pointing to a lack of econometric sophistication in Kaldor's original work nor by exploiting additional data on other major determinants of export success (e.g. technology). A reverse-causality interpretation - according to which export success allows countries to increase relative unit labor costs without substantially reducing international competitiveness - seems most promising for rationalizing the paradox.

Keywords: Trade; export success; competitiveness; technology; Kaldor effect (search for similar items in EconPapers)
Pages: 11 pages
Date: 2019-02
New Economics Papers: this item is included in nep-int and nep-pke
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