Link to the University of Pittsburgh
Link to the University Library SystemContact us link
AEI Banner

Compositional effects on productivity, labour cost and export adjustments. Bruegel Policy Contribution 2012/11, June 2012

Darvas, Zolt (2012) Compositional effects on productivity, labour cost and export adjustments. Bruegel Policy Contribution 2012/11, June 2012. [Policy Paper]

[img]
Preview
PDF - Published Version
Download (429Kb) | Preview

    Abstract

    Sectoral shifts, such as shrinkage of low labour productivity and the low-wage construction sector, can lead to apparent increased aggregate average labour productivity and average wages, especially when capital intensity differs across sectors. For 11 main sectors and 13 manufacturing sub-sectors, we quantify the compositional effects on productivity, wages and unit labour costs (ULCs) based and real effective exchange rates (REER), for 24 EU countries. Compositional effects are greatest in Ireland, where the pharmaceutical sector drives the growth of output and productivity, but other sectors have suffered greatly and have not yet recovered. Our new ULC-REER measurements, which are free from compositional effects, correlate well with export performance. Among the countries facing the most severe external adjustment challenges, Lithuania, Portugal and Ireland have been the most successful based on five indicators, and Latvia, Estonia and Greece the least successful. There is evidence of downward wage flexibility in some countries, but wage cuts have corrected just a small fraction of pre-crisis wage rises and came with massive reductions in employment even in the business sector excluding construction and real estate, highlighting the difficulty of adjusting wages downward.

    Export/Citation:EndNote | BibTeX | Dublin Core | ASCII (Chicago style) | HTML Citation | OpenURL
    Social Networking:
    Item Type: Policy Paper
    Subjects for non-EU documents: Countries > Estonia
    Countries > Greece
    Countries > Ireland
    Countries > Latvia
    Countries > Lithuania
    Countries > Portugal
    EU policies and themes > Policies & related activities > employment/labour market > employment/unemployment
    EU policies and themes > Policies & related activities > employment/labour market > labour/labor
    Subjects for EU documents: UNSPECIFIED
    EU Series: UNSPECIFIED
    ["eprint_fieldname_eusries" not defined]: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Bruegel (Brussels) > Policy Contributions
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 25 Jun 2012 21:03
    Number of Pages: 15
    Last Modified: 25 Jun 2012 21:03
    URI: http://aei.pitt.edu/id/eprint/35625

    Actions (login required)

    View Item

    Document Downloads