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The euro and firm restructuring

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  • Matteo Bugamelli
  • Fabiano Schivardi
  • Roberta Zizza

Abstract

We test whether and how the adoption of the euro, narrowly defined as the end of competitive devaluations, has affected member states� productive structures, distinguishing between within and across sector reallocation. We find evidence that the euro has been accompanied by a reallocation of activity within rather than across sectors. Shit its adoption. productivity growth has been relatively stronger in country-sectors that once relied more on competitive devaluations to regain price competitiveness. This effect is robust to potential omitted-variable bias and correlated effects. Firm-level ev�idence from Italian manifacturing confirms that low-tech businesses, which arguably benefitted most from devaluations, have been restructuring more since the adoption of the euro. Restructuring has entailed a shift of business focus from production to up�stream and downstream activities, such as product design, advertising, marketing and distribution, and a corresponding reduction in the share of blue collar workers.

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Bibliographic Info

Paper provided by Department of the Treasury, Ministry of the Economy and of Finance in its series Working Papers with number 10.

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Length: 53
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Handle: RePEc:itt:wpaper:wp2009-10

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Keywords: euro; devaluations; productivity growth; firm restructuring; skill intensity;

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