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Globalisation and the competitiveness of the euro area

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  • Filippo di Mauro
  • Katrin Forster

Abstract

Against the background of increasing competition and other significant structural changes implied by globalisation, maintaining and enhancing competitiveness has evolved into one of the prime concerns in most countries. Following up on previous work (see in particular ECB Occasional Papers No. 30 and No. 55), this Occasional Paper examines the latest developments and prospects for the competitiveness and trade performance of the euro area and the euro area countries. Starting from an analysis of most commonly used, traditional competitiveness indicators, the paper largely confirms the findings of previous studies that there have been substantial adjustments in euro area trade. Euro area firms have taken advantage of the new opportunities offered by globalisation, and have at the same time been increasingly challenged by emerging economies. This is primarily reflected in the loss of export market shares which have been recorded over the last decade. While these can partly be related to the losses in the euro area’s price competitiveness, further adjustment also seems warranted with regard to the export specialisation. Compared with other advanced competitors, the euro area remains relatively more specialised in labourintensive categories of goods and has shown only a few signs of a stronger specialisation in research-intensive goods. Nevertheless, the paper generally calls for a more cautious approach when assessing the prospects for euro area competitiveness, as globalisation has made it increasingly difficult to define and measure competitiveness. Stressing the need to take a broader view on competitiveness, specifically with a stronger emphasis on productivity performance, the paper also introduces a more elaborate framework that takes into account the interactions between country-specific factors and firm-level productivity. It thus makes it possible to construct more broadly defined competitiveness measures. Pointing to four key factors determining the global competitiveness of euro area countries – market accessibility, market size, technological leadership of firms and institutional set-up – the analysis provides further arguments for continuing efforts to increase market integration and strengthen the competitive environment within Europe as a mean of enhancing resource allocation and coping with the challenges globalisation creates. JEL Classification: F15, F43, O52

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Bibliographic Info

Paper provided by European Central Bank in its series Occasional Paper Series with number 97.

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Length: 50 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:ecb:ecbops:20080097

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Keywords: Globalisation; competitiveness; productivity;

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References

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  1. Del Gatto, Massimo & Mion, Giordano & Ottaviano, Gianmarco Ireo Paolo, 2006. "Trade Integration, Firm Selection and the Costs of Non-Europe," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5730, C.E.P.R. Discussion Papers.
  2. Lionel Fontagné & Guillaume Gaulier & Soledad Zignago, 2008. "Specialization across varieties and North-South competition," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 23, pages 51-91, 01.
  3. Ramon Gomez-Salvador & Alberto Musso & Marc Stocker & Jarkko Turunen, 2006. "Labour productivity developments in the euro area," Occasional Paper Series, European Central Bank 53, European Central Bank.
  4. Luca De Benedictis & Massimo Tamberi, 2004. "Overall Specialization Empirics: Techniques and Applications," Open Economies Review, Springer, Springer, vol. 15(4), pages 323-346, October.
  5. Bart van Ark & Mary O'Mahoney & Marcel P. Timmer, 2008. "The Productivity Gap between Europe and the United States: Trends and Causes," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 22(1), pages 25-44, Winter.
  6. Ca' Zorzi, Michele & Schnatz, Bernd, 2007. "Explaining and forecasting euro area exports: which competitiveness indicator performs best?," Working Paper Series, European Central Bank 0833, European Central Bank.
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Cited by:
  1. Paulo Soares Esteves & António Rua, 2013. "Is there a role for domestic demand pressure on export performance?," Working Papers, Banco de Portugal, Economics and Research Department w201303, Banco de Portugal, Economics and Research Department.
  2. Jules Leichter & Cristina Mocci & Stefania Pozzuoli, . "Measuring External Competitiveness:An Overview," Working Papers, Department of the Treasury, Ministry of the Economy and of Finance 2, Department of the Treasury, Ministry of the Economy and of Finance.
  3. Marcel P. Timmer & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2013. "Fragmentation, incomes and jobs: an analysis of European competitiveness," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 28(76), pages 613-661, October.
  4. GIURGIU Adriana & DODESCU Anca, 2009. "Globalisation And Export Competitiveness: A Theoretical Approach," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 318-324, May.
  5. Soares Esteves, Paulo & Rua, António, 2013. "Is there a role for domestic demand pressure on export performance?," Working Paper Series, European Central Bank 1594, European Central Bank.
  6. Robert Anderton & Paul Hiebert, . "The Impact of Globalisation on the Euro Area Macroeconomy," Discussion Papers 09/14, University of Nottingham, GEP.
  7. Bernardina Algieri, 2011. "Modelling export equations using an unobserved component model: the case of the Euro Area and its competitors," Empirical Economics, Springer, Springer, vol. 41(3), pages 593-637, December.

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