Export Market Performance of OECD Countries: An Empirical Examination of the Role of Cost Competitiveness

Abstract

We investigate the relationship between export market shares and relative unit labour costs using a long panel of 12 manufacturing industries across 14 OECD countries. We ask how sensitive are export market shares to changes in relative costs and what determines this sensitivity? Both costs and embodied technology are important, but neither can fully explain changing export positions. We explore whether residual country‐specific trends might be linked to ‘deep’ structural features of economies. Sensitivity to labour costs is lower in high tech industries and core ERM countries. Industry elasticities have increased, especially in industries subject to increasing product market competition.

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