The Impact of Price-Cost Competitiveness Factors on Economic Growth

Issue: 2/2013

Veronika Baranová

VŠB – Technical University of Ostrava, Department of National Economy, Faculty of Economy, Sokolská třída 33, 701 00 Ostrava, Czech Republic. Email: veronika.baranova@vsb.cz

The aim of this study is to verify the assumption that price-cost competitiveness factors affect long-term economic growth in the sample countries. This analysis is based on the neoclassical growth model extended by human capital. Furthermore, variables reflecting the cost-competitiveness and cost-effective real exchange rate and unit labor costs were added to the model. The default is a panel regression methodology and related methods of data analysis. The sample consists of EU member states that meet the requirement of a small open economy and membership in the OECD. On the basis of this criterion, the following countries were selected: Belgium, Czech Republic, Denmark, Estonia, Ireland, Hungary, Netherlands, Austria, Slovenia and the Slovak Republic. Annual frequency in the time frame 1999-2010 is the reference period. This is shown by the analysis results in the case that the selected sample of countries with affordable cost factors appears to be significant. The selected indicators of competitiveness can be one of the prominent factors that influence economic growth in developed countries, yet they are not a fully sufficient and comprehensive source of growth factors in terms of competitiveness.

Pages: 
63–76
DOI: 10.2478/revecp-2013-0001
JEL: F43, E13
Keywords: Price-Cost Factors, Panel Regression, economic growth, Competitiveness
References: 

 

BALCAROVÁ, P., BENEŠ, M. (2006). Metodologie měření a hodnocení makroekonomické Konkurenceschopnosti. Centrum výzkumu konkurenční schopnosti české ekonomiky. Working Paper 9/2006, Brno.

BALTAGI, H. B. (2010). Econometric Analysis of Panel Data. 4nd ed. John Wiley & Sons.

BAUMOL, J. W. (1967). Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis. The American Economic Review, vol. 57, no. 3.

BLEANEY, M., NISHIYAMA, A. (2002). Explaining Growth: A Contest Between Models. Journal of Economic Growth, no 7, pp. 43–56. DOI: 10.1023/A:1013466526642

BREITUNG, J. (2000). The Local Power of Some Unit Root Tests for Panel Data. In B. Baltagi (ed.). Advances in Econometrics, vol. 15: Nonstationary Panels, Panel Cointegration, and Dynamic Panels, Amsterdam: JAI Press, pp. 161–178.

CHOI, I. (2001). Unit Root Tests for Panel Data, Journal of International Money and Finance, vol. 20, pp. 249–272. DOI: 10.1016/S0261-5606(00)00048-6

DOMAR, D. E. (1946). Capital Expanasion, Rate od Growth, and Empoyment. Econometrica, no. 4, pp. 137–147.

Eurostat (2012). European Commission database. Retrieved January 19, 2012, from http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_da....

EZEALA-HARRISON, F. (2011). On The competing notions of international competitiveness. Retrieved January 16, 2012, from http://findarticles.com/p/articles/mi_hb6482/is_1_13/ai_n29218031/.

FELIPE, J. (2005). A note on competitiveness, unit labour costs and growth: Is „Kaldor´s paradox“a figment of interpretation?, Working Paper 6/2005 Retrieved January 17, 2012, from http://cama.anu.edu.au/Working%20Papers/Papers/2005/Felipe_62005.pdf.

FOGEL, W. R. (1994). Economic Growth, Population Theory and Physiology: The Bearings of Long-Term Processes on the Making of Economic Policy, National Bureau Of Economic Research: Working Paper, no. 4638.

GRANGER,C., HUANG, L-L. (1997). Evaluation of Panel Data Models: Some Suggestions From Time Series. Discussion Papaper, no. 97 – 10, 1–29.

HARROD, F. R. (1939). An Essay in Dynamic Theory. The economic Journal, vol. 49, no. 193, pp 14–33.

HÄMÄLÄINEN, T. J. (2003). National competitiveness and economic growth: the changing determinants of economic performance in the world economy. 1st. ed. Edward Elgar Publishing.

HEILBRONNER, L. R., MILBERG, W. S. (1997). The Crisis of Vision in Modern Economic Thought. 1st. ed. Cambridge University Press.

HINDLS, R. et al (2003). Ekonomicky slovník. Praha: C.H. Beck.

HSIAO, Cheng, (2003). Analysis of Panel Data. 2-nd ed. Cambridge: Cambridge University Press.

IM, K-S., PESARAN, M. H., SHIN, Y. (2003). Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, vol. 115, pp. 53–74. DOI: 10.1016/S0304-4076(03)00092-7

INSTITUT FOR MANAGEMENT AND DEVLOPMENT (2007). World Competitiveness Yearbook 2007.

KRUGMAN, P. (1997). Pop intnationalism, Massachusetts: MIT Press.

LEVIN, A., LIN C-F. CHU, C-S. J. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, no. 108, pp. 1–24.

LUCAS, E. R. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics, vol. 22, no. 1, pp. 3–42.

MANKIW, N., ROMER, G., WEIL, D. (1992). A Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics, vol. 107, no. 2, pp. 407–437.

PORTER, E. M. (1990). The Competitive Advantage of Nations. New York: The Free Press.

PORTER, E. M. (1994). Konkurenční strategie: metody pro analýzu odvětví a konkurentů. Praha: Victoria Publishing.

ROMER, M. P. (1986). Increasing Returns and Long-Run Growth. Journal of Political Economy, vol. 94, no. 5, pp. 10–19.

SALA-I-MARTIN, X. (1997). ‘I Just Ran Two Million Regressions’, American Economic Review, no. 87, pp. 178–183.

SOLOW, M. R. (1956). Contribution to the Theory of Economic Growth. Quartely Journal of Economics, no. 70, pp. 65–94. 

SWAN, W. T. (1956). Economic Growth and Capital Accumulation. The Economic Record, no. 63, pp. 334–361.

ŠMÍDKOVÁ, K. (1995). Vývoj přístupu k makroekonometrickému modelování. Politická ekonomie, vol 4, no 1, pp. 113–124. 

TURNER, P., VAN’T DACK, J. (1993). Measuring international price and cost competitiveness. BIS Economic Papers, no. 39. Retrieved January 16, 2012, from http://www.bis.org/publ/econ39.pdf

WOOLDRIDGE, J. M. (2002). Econometric Analysis of Cross Section and Panel. Messachusetts Institue of Technology. 752 p.

ZEMANOVÁ, V. (2005). Teoretická východiska pro pojetí konkurenční schopnosti podniku. Acta Oeconomica Pragensia, vol. 13, no. 2.