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Measuring quality and non-cost competitiveness at a country-product level

  • Francesco Di Comite

This paper contributes to the ongoing debate on macroeconomic imbalances and external competitiveness by developing a set of indicators of export capability at a country-product level which can be used to complement the existing toolkit of instruments based mostly on unit labour costs and relative price levels. A micro-founded methodology is here proposed to extract information on the capacity of a country's exporters to compete abroad by combining trade and macroeconomic data. In particular, light is shed on two independent components of demand for a particular variety (country-product combination): markups-shifting "quality" and sales-boosting "non-cost competitiveness". Together with cost efficiency and information on foreign prices and consumption, these additional indicators may foster our understanding of the determinants of a country's external position, thus providing better guidance for policymaking.

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File URL: http://ec.europa.eu/economy_finance/publications/economic_paper/2012/ecp467_en.htm
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Paper provided by Directorate General Economic and Financial Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers 2008 - 2015 with number 467.

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Length: 50 pages
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:euf:ecopap:0467
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  1. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," 2004 Meeting Papers 530, Society for Economic Dynamics.
  2. Konstantins Benkovskis & Julia Woerz, 2012. "Evaluation of Non-price Competitiveness of Exports from Central, Eastern and Southeastern European Countries in the EU Market," Working Papers 2012/01, Latvijas Banka.
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  9. Konstantins Benkovskis & Ramune Rimgailaite, 2011. "The quality and variety of exports from the new EU member states," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 19(4), pages 723-747, October.
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  13. Robert C. Feenstra & John Romalis, 2014. "International Prices and Endogenous Quality," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 477-527.
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  15. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
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  17. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
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  19. Robert C. Feenstra & David E. Weinstein, 2010. "Globalization, Markups and U.S. Welfare," NBER Working Papers 15749, National Bureau of Economic Research, Inc.
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