Unit Values, Unit Labor Costs and Trade Performance in Four Central European Countries
AbstractOur paper, relying on product and industry level data, analyses factors behind divergences in aggregate export price changes in four Central European countries, Poland, Hungary, Czech Republic and Slovakia. We focus on exports to Germany, their largest trading partner and observe the period 2000-2010. As our hypothesis is that divergence in changes may be explained by convergence in levels, we construct relative level indices of export unit values (UVs, as proxies of export prices) and unit labor costs (ULCs), based on the COMEXT and EU KLEMS databases, respectively. By merging the relative level indices with trade performance indicators (export volumes, market shares, extensive and intensive margins), we investigate the relation between UVs and ULCs, their changes, as well as their respective impact on trade performance. Our results suggest that (i) there is convergence in the four countries' export UV levels, (ii) changes in UVs were positively correlated with changes in ULCs, (iii) a higher UV increase was associated with lower growth in export volume, (iv) the level of ULC and that of labor productivity does not show convergence, but the level of labor costs and wage shares do. The results indicate that our approach helps understanding factors contributing to changes in UVs, as well as trade performance of countries. However, to reach more general results, the approach should be extended to more countries and markets.
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Bibliographic InfoPaper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 1329.
Length: 79 pages
Date of creation: Sep 2013
Date of revision:
export price indices and unit values; unit labor costs; price level convergence; export performance;
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-18 (All new papers)
- NEP-EUR-2013-10-18 (Microeconomic European Issues)
- NEP-TRA-2013-10-18 (Transition Economics)
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