Historia clínica Fuentes de datos

Price and cost competitiveness reflects the ability of firms to sell cheaply in international markets. Among these indicators, we distinguish four main subgroups: • Real Effective Exchange Rates (REERs), which reflect relative changes in the prices

of a country’s exports goods due to changes in nominal exchange rates and inflation differentials.

• Unit Labour Costs, which reflect cost competitiveness in an important share of value added.

• Price Cost Margins, which measure the intensity of price competition.

REERs reflect relative changes in the prices of a country’s export goods due to changes in nominal exchange rates and inflation differentials. The REER is computed by deflating the Nominal Effective Exchange Rate (NEER), the unadjusted weighted average value of a country’s currency relative to all major currencies being traded within a pool of currencies. The NEER can be deflated by selected relative price or cost

BOX 6.2: OTHER MICRO-FOUNDED INDICATORS

Market shares and the international exposure of firms could be investigated also with a bottom-up approach that, starting from micro-level data on firms, outlines the country or sectoral macro outlook. For example, on top of measures of export or import market shares, from micro-data is possible to retrieve themedian or the variance of export (import) share, and thedistribution of exporting (importing) firms by export (import) share.

A similar analysis could be conducted by focusing on theaverage, the median, and the distribution of the value of exports, value of imports or value of foreign production. Since firms, normally, are Pareto distributed, these measures provide a good insight into the ‘happy few’ firms involved in foreign activities or production. Moreover, to better underline the complexity of foreign operations, other useful measures are theaverage, the median and the variance of the number of product exported.

deflators, leading to different measures of real exchange rate96,97,98

. The two suggested ones are the PPI-based REER and the UCLM-based REER.

The PPI-based REER index uses as deflator the producer prices index:

• Rationale: is closer to the production side of the economy (includes industrial products and intermediate goods that can be traded internationally) than the CPI; in fact CPI-based index shows the dynamics of relative consumer prices, and hence it can be a rather poor approximation of the dynamics in relative export prices. • Even though PPI-based REER still includes production for the domestic market, PPIs

are viewed as a reasonable proxy for tradable goods prices.

• Problems: data on export-oriented PPI are usually very scarce and their composition and compilation varies considerably across countries. It is important to collect comparable measure of PPI at the European level.

The ULCM-based REER index:

• Rationale: Unit labour costs in the manufacturing sector (ULCM) are often used as a proxy for unit labour costs in the tradable goods sector. ULCM-based REER is considered a better measure compared to the ULC-based index that usually refers to the total economy, including also the services sector.

• Problems: Unit labour costs do not cover all of the costs incurred by firms; factor substitution may affect these indicators without necessarily resulting in a change in productivity. Moreover, as for ULC-based index, cost measures are typically more affected by data quality issues than price measures. The last problem is related to the fact that this popular measure of competitiveness may, however, be too narrow a concept as it only focuses on a certain sector of the economy.

The percentage change over three years of the real effective exchange rate (REER) based on consumer price index deflators:

• Rationale:This measure captures the drivers of persistent changes in price and cost competitiveness of each member state relative to its major trading partners, and thus illustrates the magnitude of developments in price and cost competitiveness. The three years span casts a more comprehensive picture of global ‘price’ pressure on domestic producers in a medium-term perspective

96. Turner P and Van’t Dack J. (1993) 'Measuring International Price and Cost Competitiveness', BIS Economic Paper No. 39.

97. Benkovskis Konstantins & Worz Julia (2012) 'Evaluation of Non-Price Competitiveness of Exports from CESEE Countries in the EU Market', Bank of Latvia WP 1/2012.

98. Schmitz, M., De Clercq, M., Fidora, M., Lauro, B. and Pinheiro C., (2012) 'Revisiting the effective exchange rates of the euro', ECB Occasional paper series N. 134, June 2012.

• Other commonly used deflators are: the Consumer Price Index, the Gross Domestic Product, export prices and Unit Labour Costs.

The Unit Labour Cost (ULC):

• Description: ULC is calculated as the ratio of total labour costs to real output, or equivalently, as the ratio of mean labour costs per hour to labour productivity (output per hour).

• Rationale:ULC represents a link between productivity and the cost of labour in producing output. Unit Labour Costs are seen as one of the most relevant measures of efficiency and aggregate competitiveness. Any increase in added value will translate into a higher level of firm competitiveness, while an increase in the cost of employees would reduce firm’s competitiveness. They are easy to compute and are typically used for country level analysis.

• Problems: This measure, per contra, presents shortcomings both at the macro and the micro level. At the macro level ULC are not considered to be a comprehensive measure of competitiveness (labour earnings represent just one component of total value added). Moreover, the high heterogeneity across firms induces an aggregation bias. The effect of the aggregation bias on the adequacy of standard aggregate cost measures in capturing export capability can be shown with reference to the so- called Spanish paradox99_{. At the micro level the bias could derive from the fact that} ‘high-quality’ firms might be associated with a higher total cost of employees and thus, if not perfectly reflected in higher added value, in a higher (rather than lower) ULC.