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Export performance, price competitiveness and technology: Revisiting the Kaldor paradox

Author

Listed:
  • Claudius Graebner

    (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria)

  • Philipp Heimberger

    (Vienna Institute for International Economic Studies)

  • Jakob Kapeller

    (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria)

Abstract

We reassess the contemporary relevance of the "Kaldor paradox" (1978), according to which changes in relative unit labor costs as well as relative export prices are positively correlated with advanced countries' export shares in world markets - although conventional trade theory predicts the opposite. Using a sample of 34 OECD countries over the period 1980-2015, we find clear evidence for the continued relevance of Kaldor's paradox. Our findings indicate that the paradox can neither be resolved by pointing to a lack of econometric sophistication in Kaldor's original work nor by exploiting additional data on other major determinants of export success (e.g. technology). A reverse-causality interpretation - according to which export success allows countries to increase relative unit labor costs without substantially reducing international competitiveness - seems most promising for rationalizing the paradox.

Suggested Citation

  • Claudius Graebner & Philipp Heimberger & Jakob Kapeller, 2019. "Export performance, price competitiveness and technology: Revisiting the Kaldor paradox," ICAE Working Papers 88, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    • Handle: RePEc:ico:wpaper:88
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    File URL: https://www.jku.at/fileadmin/gruppen/108/ICAE_Working_Papers/wp88.pdf
    File Function: First version, 2018
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    Cited by:

    1. Grodzicki, Maciej J. & Skrzypek, Jurand, 2020. "Cost-competitiveness and structural change in value chains – vertically-integrated analysis of the European automotive sector," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 276-287.

    More about this item

    Keywords

    Trade; export success; competitiveness; technology; Kaldor effect;
    All these keywords.

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