EconPapers    
Economics at your fingertips  
 

Competitiveness at the Country-Sector Level: New Measures Based on Global Value Chains

Martyna Marczak () and Thomas Beissinger ()

No 11499, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We propose the so-called domestic "embodied unit labor costs" (EULC) at the country-sector level as a new cost-related basis for measures of international competitiveness. EULC take into account that a sector's labor costs constitute only a small share of its total cost which to a large extent consist of expenses for intermediate goods from other sectors. In line with a simple Leontief-type model, the proposed measure is constructed as a weighted average of unit labor costs of all domestic sectors contributing to the final goods of a specific sector. The contribution is expressed in value-added terms and takes global supply chains into account. We also show how EULC can be consistently calculated for sectoral aggregates such as the tradable goods sector. Based on EULC we propose the "embodied real effective exchange rate" (EREER) at the country-sector level as a new competitiveness indicator where the relevance of trading partners is quantified by an appropriate value-added measure. The chosen value-added concept replaces gross exports traditionally used as the weight basis in effective exchange rates. Using the World Input-Output Database (WIOD) we employ the proposed indicators to shed new light on changes in cost competitiveness at the sectoral level for Germany, and compare the empirical evidence with selected other euro area countries.

Keywords: unit labor costs; real effective exchange rate; global supply chains; input-output analysis; sectoral analysis; international competitiveness; WIOD; Germany (search for similar items in EconPapers)
JEL-codes: J30 C67 E01 F16 F23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hme and nep-int
Date: 2018-04
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://ftp.iza.org/dp11499.pdf (application/pdf)

Related works:
Working Paper: Competitiveness at the country-sector level: New measures based on global value chains (2018) Downloads
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:iza:izadps:dp11499

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().

 
Page updated 2019-11-12
Handle: RePEc:iza:izadps:dp11499