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A new unit labour cost changes decomposition Four pillars of cost competitiveness recovery

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  • Charles-Henri Dimaria

    (LEO - Laboratoire d'Économie d'Orleans [UMR7322] - UO - Université d'Orléans - UT - Université de Tours - CNRS - Centre National de la Recherche Scientifique, STATEC - Institut national de la Statistique et des Etudes Economiques - LUXEMBOURG)

  • Chiara Peronni

    (STATEC - Institut National de la Statistique et des Etudes Economiques - Institut de Luxembourg)

Abstract

This article presents a new decomposition of unit labour costs into compensation per worker and labour productivity, which, in turn, is decomposed into e ffciency gains, technical progress and capital deepening. Data for Western European countries and the US show that the evolution of labour productivity components counteracts the deterioration in countries' cost competitiveness caused by increases in nominal wages. The policy implication is that e fforts aimed at reducing nominal labour costs should be accompanied by policies fostering capital deepening. Further improvements in countries' cost competitiveness can be achieved by enhancing efficiency gains and technical progress, which has been mostly negative during the period under study.

Suggested Citation

  • Charles-Henri Dimaria & Chiara Peronni, 2012. "A new unit labour cost changes decomposition Four pillars of cost competitiveness recovery," Working Papers halshs-00826324, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00826324
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00826324v1
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    References listed on IDEAS

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    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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