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The Euro and Firm Restructuring

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Author Info
Matteo Bugamelli
Fabiano Schivardi
Roberta Zizza

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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. Since 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 evidence from Italian manufacturing 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 upstream 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14454.

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Date of creation: Oct 2008
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Handle: RePEc:nbr:nberwo:14454

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Find related papers by JEL classification:
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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References listed on IDEAS
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  6. Auer, Raphael & Fischer, Andreas M, 2008. "The Effect of Trade with Low-Income Countries on U.S. Industry," CEPR Discussion Papers 6819, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Lucia Foster & John Haltiwanger & Chad Syverson, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," Working Papers 05-11, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alberto Alesina & Silvia Ardagna & Vincenzo Galasso, 2008. "The Euro and Structural Reforms," Working Papers 344, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
    Other versions:
  2. Sergio de Nardis & Carmine Pappalardo, 2009. "Export, Productivity and Product Switching: The Case of Italian Manufacturing Firms," ISAE Working Papers 110, ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY). [Downloadable!]
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