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

Publication Date: April 01, 2012
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: 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.
Series: Working Paper No. 12/107
Subject(s): Current account deficits | Economic growth | Global competitiveness | Industrial sector | Labor costs | Productivity | Real effective exchange rates

Author's Keyword(s): Competitiveness | unit labor cost | exchange rate.
Publication Date: April 01, 2012
ISBN/ISSN: 9781475503289/1018-5941 Format: Paper
Stock No: WPIEA2012107 Pages: 26
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