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Unit labor cost and productivity recovery under non neutral technical change

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  • Charles-Henri DI MARIA
  • Chiara PERONI

Abstract

This document proposes a new decomposition of unit labor cost changes (ULC) in terms of efficiency, technical progress and capital deepening. This decomposition is applied to data for western European countries and the US. Results show that sustained growth rates of labor compensation and poor labor productivity gains lead to large losses in cost competitiveness. The poor productivity performance is explained by low technical progress and even technical regress. In addition, it is shown that labor intensive technical change results in positive efficiency changes while capital intensive technical changes improves overall technical change. Last, when technical change is capital intensive cost competitiveness losses are lower.
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Suggested Citation

  • Charles-Henri DI MARIA & Chiara PERONI, 2012. "Unit labor cost and productivity recovery under non neutral technical change," LEO Working Papers / DR LEO 1734, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    • Handle: RePEc:leo:wpaper:1734
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