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Evaluation of Non-price Competitiveness of Exports from Central, Eastern and Southeastern European Countries in the EU Market

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  • Konstantins Benkovskis
  • Julia Woerz

Abstract

We propose an export price indicator adjusted for non-price factors as a measure of a country's competitiveness. Based on the approach by Broda and Weinstein (2006) who adjust price developments for changes in varieties of imported products, we relax their assumption of unchanged quality over time and apply this index to export prices of the ten CESEE EU Member States which acceded in 2004 and 2007. The index is calculated using data from Comext at the highly disaggregated eight-digit CN product level. Our analysis spans the time period from 1999 to 2010, thus including the recent global recession in 2009. The results show that all CESEE10 countries experienced loss in price competitiveness, although much smaller than is usually suggested by the traditional CPI-based or ULC-based real effective exchange rate measures. Although relative export prices (unit values) increased stronger in CESEE10 countries as compared with their competitors, the average quality of their goods increased even more, thus fully compensating for the rise in prices. These improvements in non-price competitiveness were pronounced in all CESEE10 countries.

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Bibliographic Info

Paper provided by Latvijas Banka in its series Working Papers with number 2012/01.

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Date of creation: 13 Apr 2012
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Handle: RePEc:ltv:wpaper:201201

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Keywords: non-price competitiveness; quality; relative export price;

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References

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  1. Uwe Dulleck & Neil Foster & Robert Stehrer & Julia Woerz, 2005. "Dimensions of quality upgrading," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 51-76, 01.
  2. Chonira Aturupane & Simeon Djankov & Bernard Hoekman, 1999. "Horizontal and vertical intra-industry trade between Eastern Europe and the European union," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(1), pages 62-81, March.
  3. Mohler, Lukas & Seitz, Michael, 2010. "The Gains from Variety in the European Union," Discussion Papers in Economics 11477, University of Munich, Department of Economics.
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  5. Wörz, Julia & Benkovskis, Konstantins, 2013. "How Does Quality Impact on Import Prices?," Working Papers 175, Oesterreichische Nationalbank (Austrian Central Bank).
  6. Juan Carlos Hallak & Peter K. Schott, 2008. "Estimating Cross-Country Differences in Product Quality," NBER Working Papers 13807, National Bureau of Economic Research, Inc.
  7. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," 2004 Meeting Papers 530, Society for Economic Dynamics.
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  9. Konstantins Benkovskis & Ramune Rimgailaite, 2010. "The Quality and Variety of Exports from New EU Member States: Evidence from Very Disaggregated Data," Working Papers 2010/02, Latvijas Banka.
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  12. Blonigen, Bruce A. & Soderbery, Anson, 2010. "Measuring the benefits of foreign product variety with an accurate variety set," Journal of International Economics, Elsevier, vol. 82(2), pages 168-180, November.
  13. Ashoka Mody & Deniz Igan & Stefania Fabrizio, 2007. "The Dynamics of Product Quality and International Competitiveness," IMF Working Papers 07/97, International Monetary Fund.
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Cited by:
  1. Benkovskis, Konstantins & Wörz, Julia, 2012. "Non-price competitiveness of exports from emerging countries," BOFIT Discussion Papers 19/2012, Bank of Finland, Institute for Economies in Transition.
  2. Francesco Di Comite, 2012. "Measuring quality and non-cost competitiveness at a country-product level," European Economy - Economic Papers 467, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  3. Konstantins Benkovskis, 2012. "Competitiveness of Latvia's Exporters," Working Papers 2012/03, Latvijas Banka.

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