Competitiveness of the Euro Zone Manufacturing: A Panel Data Analysis

By Fafaliou, Irene; Polemis, Michael L. | International Advances in Economic Research, February 2013 | Go to article overview

Competitiveness of the Euro Zone Manufacturing: A Panel Data Analysis


Fafaliou, Irene, Polemis, Michael L., International Advances in Economic Research


The purpose of this paper is to assess the main aspects involved in the competitiveness of manufacturing industries in the Euro zone area (EZ-12). To this end, we apply the generalized method of moments to a panel data error correction model. Our sample spans the period from 1970 to 2007, and our findings provide insight into the impact of manufacturing on the international competitiveness of European firms and industries. From the estimated magnitude of the relevant coefficients, we conclude that in the long run, a change in labor and capital compensation is not fully passed on to manufacturing growth, while an increase in the market power of the manufacturing sector will negatively affect its competitiveness.

Keywords Competitiveness * Euro zone manufacturing * Panel data * Generalized method of moments

JEL E00 * L6 * L16 * C33

Introduction

Despite the changing face of the business economy, manufacturing still plays a key role in Europe's prosperity (European Commission 2011a). The manufacturing industry in Europe has been going through a process of structural changes for decades (European Commission 2009). The current and sudden economic crisis that has affected the Euro zone area in recent years has pointed to the importance of adjustment and structural change more than ever (European Commission 2011b). Indeed, there is a compelling need for better understanding and more insight into the adjustment pressure that individual economic sectors experience, the adjustment performance of sectors and countries, and the institutional framework that directly impacts the need and the capabilities of change. The ability of the manufacturing industry to adapt to change and proactively stimulate structural change is pivotal for achieving the European Union's (EU) overall growth and job objectives (Ibid). The EU's ability to adapt to changing market realities and technological developments seems to lag behind those of its key competitors, notably the U.S., but probably even more behind new global players such as Russia, India, or China (Stehrer et al. 2011).

Competitiveness has become a cornerstone in an increasingly open and integrated world economy (European Commission 2010). Despite its widespread importance, the concept of competitiveness is often controversial and misunderstood. There is neither general consensus among the economists and government officials regarding the definition of competitiveness nor a universally accepted theory to explain it. According to the eminent Harvard professor M. Porter (2005), competitiveness is the fundamental determinant of the level of prosperity a country can sustain. To firms, competitiveness means the ability to compete in world markets with a global strategy (Porter 1998a, b). Economic success has been closely associated with the level of competitiveness, i.e., the ability to compete. However, there has been controversy in defining the relevant factors involved and the corresponding concept of competitiveness. In particular, while competitiveness is readily defined at the firm level, the concept becomes rather vague when applied at the industry and national levels. The EU has often tried to redefine the term by providing sectoral competitiveness indicators and shares. According to the latest definition, exemplified in the 2011 European Competitiveness Report (European Commission 2011b, p. 33), the key factor for competitiveness in the long run is the impact of overall economic activity on productivity attained through industrial R&D activity and innovation.

The purpose of this paper is to assess the main drivers involved in the competitiveness of manufacturing industries in the Euro zone area (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain). The econometric estimation is based on pooled time-series cross-section data for 13 industries covering the period 1970-2007. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Competitiveness of the Euro Zone Manufacturing: A Panel Data Analysis
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.