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The C risis , External I mbalances and C ompetitiveness in the Euro Area

The C risis , External I mbalances and C ompetitiveness in the Euro Area. Giorgio Barba Navaretti , University of Milan and Centro Studi Luca d’Agliano. LAC-EU Economic Forum 2013 Santiago, January 21 st 2013. EU growth , competitiveness and current account imbalances.

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The C risis , External I mbalances and C ompetitiveness in the Euro Area

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  1. The Crisis, ExternalImbalances and Competitiveness in the Euro Area Giorgio Barba Navaretti, University of Milan and Centro Studi Luca d’Agliano LAC-EU Economic Forum 2013 Santiago, January 21st 2013

  2. EU growth, competitiveness and current account imbalances Capital inflows in the right direction, but not to the best use Sources: EC and Eurostat. Notes: Countries are ranked according to GDP per capita in 1999. GDP per capita, relative to the EA, in PPS.

  3. Externalimbalances: Thingschange Source: Barues, Lawson, Radziwill and Lane, OECD WP

  4. ExternalImbalances: ForecastofDecline in the Periphery Source: IMF, WEO, October2012

  5. Macro Macro and then?? • Debate on “competitiveness”: macro indicators • Real Effective Exchange Rates (REER) • Unit Labor Costs (ULC) • Export shares • Current Account (in % of GDP)

  6. CorrectingExternalImbalances:IsDeflationEnough? INDUSTRY? Source: IMF, WEO, October2012

  7. Sectors? Manufacturing TradeBalance/GDP (%) Source: OECD and IMF. Data for 2011, except Spain 2010

  8. And micro? BUT Firms? Nations and sectors do not produce, do not trade, do not compete; it is firms that produce trade and compete.

  9. Averagefirmsize

  10. What do welearnwhenwe look at firms? • THE EFIGE SECOND POLICY POLICY REPORT • Differencesin country patterns: • German and French more sophisticated internationalisers • Spain and Hungarylaggingbehind • Italians, higher export propensity • Firmscharacteristicsaffectinternationalisationpatterns in a remarkablysimilar way acrosscountries • Patternsexplainedmostly by firmcharacteristics • Countrydifferbecausetheyhave a different industrial structure

  11. NumberofDestinationsofExports ManyFirms in FewCountries, FewFirms in ManyCountries Policy: How to shift these distributions to the right?

  12. Global Operations and TFP Watch Out for the Causality Link Perspective: higher moments = reallocation of resources Source: Altomonte, Aquilante, and Ottaviano (2012)

  13. Global Operations and TFP Three steps • Identifythresholds Identifyfirmsmovingabovethresholds Identifyfeaturesoffirmsmovingabovethresholds Source: Altomonte, Aquilante, and Ottaviano (2012)

  14. Whatittakes to move up Higher ex ante productivity More human capital No family managers Less leverage Foreign groups IMPACT ON TOTAL EFFICIENCY AND TRADE DEPENDS ON REALLOCATIVE EFFECTS BUT

  15. Implications • Industrial structure (distribution of firmcharacteristics)important for tradeimbalances • Caveat: export notnecessarilyNirvana • => Butclearly export competitivenessreflectsefficiency and growth of industry and viceversa • Germanmiracle: didGermany have an industrial structureable to respond to changes in incentives?? • = > Mittelstandt ? Fraunhofer? • For othercountriesisfirmsgrowthimportant (Italy)? • Nothing can be forced, butimpediments to growth? And doesreallocation of resourcesfavourproductivitygrowth? • Finallywhatabout industrial policy??

  16. The Happy Few ExportsVeryConcentrated Share of Total Exports for Top Exporters, by Country

  17. WhatExplains Export Status? Firms’ Features

  18. A SimpleDecomposition • To quantify the importance of size and sector, apply to ITA, FRA and SPA the German structure (Germany only as benchmark; no suggestion to become German!) • Keep fixed a country’s total employment in the manufacturing sector and shift workers across firms and sectors to replicate German structure • How? Changing the weighting scheme as if sample firms in ITA, FRA and SPA were drawn from German population • Importantly, keep a country’s export propensity and export share by size and sector classes

  19. Export rise ifweapplyGerman industrial strucure, more in Italy and Spainthan in France (Numberofworkersconstant) Italy: Most of the action is size France and Spain, industry matters most

  20. Switchers and the rest 2001/2 vs 2008/9 Source: Altomonte, Aquilante, and Ottaviano (2012)

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