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Assessing Competitiveness Using Industry Unit Labor Costs; An Application to Slovakia

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  • International Monetary Fund

Abstract

Conceptual ambiguities and statistical weaknesses hamper the assessment of external competitiveness. The term competitiveness, while applied extensively, is often imprecisely defined, which can result in analytical errors and mistaken policy advice. Furthermore, aggregate statistical measures of competitiveness in terms of exchange rate misalignment can be biased. To address these issues, this paper makes two contributions. First, it clarifies the external competitiveness concept, highlighting the dichotomy between productivity-driven long-run growth and short-run deviations from the underlying growth trajectory, which can be related to exchange rate misalignment. Second, it develops a disaggregated statistical approach for examining competitiveness based on unit labor costs at the three digit industry level in a group of comparable countries. The case of Slovakia is used to illustrate these concepts, but the analytical insights have general application.

Suggested Citation

  • International Monetary Fund, 2012. "Assessing Competitiveness Using Industry Unit Labor Costs; An Application to Slovakia," IMF Working Papers 12/107, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/107
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    References listed on IDEAS

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    1. Ashoka Mody & Deniz O Igan & Stefania Fabrizio, 2007. "The Dynamics of Product Quality and International Competitiveness," IMF Working Papers 07/97, International Monetary Fund.
    2. George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
    3. Leon Podkaminer, 2010. "Real Convergence And Price Levels: Long-Term Tendencies Versus Short-Term Performance In The Enlarged European Union," Metroeconomica, Wiley Blackwell, vol. 61(4), pages 640-664, November.
    4. Jaewoo Lee & Jonathan David Ostry & Alessandro Prati & Luca A Ricci & Gian M Milesi-Ferretti, 2008. "Exchange Rate Assessments; CGER Methodologies," IMF Occasional Papers 261, International Monetary Fund.
    5. Bussière, Matthieu & Ca' Zorzi, Michele & Chudik, Alexander & Dieppe, Alistair, 2010. "Methodological advances in the assessment of equilibrium exchange rates," Working Paper Series 1151, European Central Bank.
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