IDEAS home Printed from https://ideas.repec.org/p/cfe/wpcefa/2013_04.html
   My bibliography  Save this paper

International Competitiveness: is the reduction of wages a solution? An evaluation of the Portuguese case

Author

Listed:
  • Elsa Vaz

    () (Economics Department of University of Évora and CEFAGE)

  • Maria Paula Fontoura

    (ISEG - School of Economics and Management / Technical University of Lisbon, and UECE – Research Unit on Complexity and Economics)

Abstract

The purpose of this paper is to analyse, for the case of Portugal, the effectiveness of wage reduction - a current proposal since 2011 ??to help the country to reverse the high public and external debt - in promoting the efficiency and international competitiveness of the economy. A static multi-sector and single-country general equilibrium model is used and data is collected from the GTAP7 Database. The model allows the measurement of changes by sector. The simulations performed show that extending the reduction of wages already deployed by the government in the public sector to the private sector leads to a positive impact on employment (both skilled and unskilled labour), production and volume of exports in all sectors except those that are R&D intensive, the latter having a low weight in the Portuguese economy. However, it is possible that the positive results in terms of external competitiveness are not sustainable, as the impact on productivity is negative, albeit small, for most sectors. There are also reasons for concern regarding the observed deterioration of the trade balance of most sectors, the exception being the traditional labour intensive sectors, which show good prospects in this respect.

Suggested Citation

  • Elsa Vaz & Maria Paula Fontoura, 2013. "International Competitiveness: is the reduction of wages a solution? An evaluation of the Portuguese case," CEFAGE-UE Working Papers 2013_04, University of Evora, CEFAGE-UE (Portugal).
  • Handle: RePEc:cfe:wpcefa:2013_04
    as

    Download full text from publisher

    File URL: http://www.cefage.uevora.pt/en/content/download/3545/46044/version/1/file/2013_04.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Filipe Amado, Carla Alexandra & Dyson, Robert G., 2008. "On comparing the performance of primary care providers," European Journal of Operational Research, Elsevier, vol. 185(3), pages 915-932, March.
    2. Bruce Hollingsworth, 2008. "The measurement of efficiency and productivity of health care delivery," Health Economics, John Wiley & Sons, Ltd., vol. 17(10), pages 1107-1128.
    3. Goddard, Maria & Smith, Peter, 2001. "Equity of access to health care services: : Theory and evidence from the UK," Social Science & Medicine, Elsevier, pages 1149-1162.
    4. Bruce Hollingsworth & P.J. Dawson & N. Maniadakis, 1999. "Efficiency measurement of health care: a review of non‐parametric methods and applications," Health Care Management Science, Springer, vol. 2(3), pages 161-172, July.
    5. Campbell, S. M. & Roland, M. O. & Buetow, S. A., 2000. "Defining quality of care," Social Science & Medicine, Elsevier, pages 1611-1625.
    6. Thanassoulis, E. & Boussofiane, A. & Dyson, R. G., 1995. "Exploring output quality targets in the provision of perinatal care in England using data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 80(3), pages 588-607, February.
    7. Luis Murillo-Zamorano & Carmelo Petraglia, 2011. "Technical efficiency in primary health care: does quality matter?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 12(2), pages 115-125, April.
    8. repec:aph:ajpbhl:1977:67:2:179-182_1 is not listed on IDEAS
    9. George A. Boyne, 2002. "Public and Private Management: What's the Difference?," Journal of Management Studies, Wiley Blackwell, vol. 39(1), pages 97-122, January.
    10. Mooney, Gavin & Hall, Jane & Donaldson, Cam & Gerard, Karen, 1991. "Utilisation as a measure of equity: weighing heat?," Journal of Health Economics, Elsevier, vol. 10(4), pages 475-480.
    11. Culyer, A. J. & Wagstaff, Adam, 1993. "Equity and equality in health and health care," Journal of Health Economics, Elsevier, vol. 12(4), pages 431-457, December.
    12. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    13. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-444, June.
    14. Kumbhakar,Subal C. & Lovell,C. A. Knox, 2003. "Stochastic Frontier Analysis," Cambridge Books, Cambridge University Press, number 9780521666633, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Competitiveness; Wages; Stability and Growth Pact; General Equilibrium Model; Portugal.;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cfe:wpcefa:2013_04. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Angela Pacheco). General contact details of provider: http://edirc.repec.org/data/cfevopt.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.