Convergence Of Italy’S Tradable Sector Growth Rate And Wage Stagnation

In the last five years the Italian manufacturing sector has reduced the growth gap vis-a`-vis the euro area, in the face of a continuing growth differential in the service sector. The improvement of cost competitiveness is among the factors that led to this recovery in the manufacturing sector. However, as long as competitiveness gains mainly depend on the slowdown in wages rather than on increases in productivity extended to all sectors of the economy, the process cannot be considered virtuous. It entails not only beneficial effects on exports, but also unfavourable consequences on real wages and household incomes and, therefore, on domestic demand.