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International comparisons of the levels of unit labor costs in manufacturing

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  • Peter Hooper
  • Elizabeth Vrankovich
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    Abstract

    Comparing absolute levels of unit labor costs across countries entails translating labor compensation rates and productivity measured in national currencies into a common currency (e.g., U.S. dollars). Compensation rates are translated using market exchange rates and productivity is translated using relative output price levels. This paper focuses on the estimation of relative output price levels. Two approaches have been used, one based on relative unit values and the other on expenditure PPPs. We use primarily the latter approach and extend earlier work in this area by adjusting expenditure PPPs for biases introduced by indirect taxes, distribution margins, and trade prices. We compute for each of the G-7 industrial countries unit labor cost levels in U.S. dollars for total manufacturing and for various subsectors of manufacturing. Our estimates suggest that in 1995, U.S. unit labor costs were substantially below those in Japan and Germany, somewhat below those in France and the United Kingdom, and very similar to those in Canada and Italy. The cross-country differences we find are somewhat larger than--albeit qualitatively similar to--those obtained using the unit value approach.

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    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 527.

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    Date of creation: 1995
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    Handle: RePEc:fip:fedgif:527

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    Related research

    Keywords: Labor productivity ; Manufactures;

    References

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    1. repec:sae:niesru:v:139:y::i:1:p:46-63 is not listed on IDEAS
    2. Patrick A. Messerlin, 1993. "The French Distribution Industry and the Openness of the French Economy," OECD Economics Department Working Papers 138, OECD Publishing.
    3. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 239-300 National Bureau of Economic Research, Inc.
    4. Luca Pellegrini & Angelo M. Cardani, 1993. "The Italian Distribution System," OECD Economics Department Working Papers 139, OECD Publishing.
    5. Josef Lachner & Uwe Chr. Täger & Günter Weitzel, 1993. "The German Distribution System," OECD Economics Department Working Papers 137, OECD Publishing.
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    8. Hooper, Peter & Larin, Kathryn A, 1989. "International Comparisons of Labor Costs in Manufacturing," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 35(4), pages 335-55, December.
    9. Frank R. Lichtenberg & Zvi Griliches, 1986. "Errors of Measurement in Output Deflators," NBER Working Papers 2000, National Bureau of Economic Research, Inc.
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    18. Szirmai, Adam & Pilat, Dirk, 1990. "Comparisons of Purchasing Power, Real Output and Labour Productivity in Manufacturing in Japan, South Korea and the U.S.A., 1975-85," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 36(1), pages 1-31, March.
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    21. Nishimura, Kiyohiko G., 1993. "The distribution system of Japan and the United States: a comparative study from the viewpoint of final-goods buyers," Japan and the World Economy, Elsevier, vol. 5(3), pages 265-288, September.
    22. Paul Stoneman & Nathan Francis, 1994. "Double Deflation and the Measurement of Output and Productivity in UK Manufacturing 1979-89," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(3), pages 423-437.
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    Citations

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    Cited by:
    1. Timmer, Marcel P., 1999. "Climbing the technology ladder too fast? : an international comparison of productivity in South and East-Asian manufacturing, 1963-1993," CCSO Working Papers 199919, University of Groningen, CCSO Centre for Economic Research.
    2. Harald Lehmann, 2003. "Lohnstückkosten und Wettbewerbsfähigkeit - Eine mikroökonometrische Untersuchung für Ostdeutschland," IWH Discussion Papers 180, Halle Institute for Economic Research.
    3. Jörg Hinze, 1998. "Problems of international labour cost comparisons," Intereconomics: Review of European Economic Policy, Springer, vol. 33(3), pages 146-152, May.

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