Currency and Competitiveness in Europe
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Currency and Competitiveness in Europe

Edited by Klaus Liebscher, Josef Christl, Peter Mooslechner and Doris Ritzberger-Grünwald

This book combines currency matters with competitiveness considerations, with a view to raising the understanding of exchange rate dynamics and to analysing the role of exchange rates in reinforcing economic competitiveness.
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Chapter 16: Structural Aspects of Competitiveness

Julia Woerz


Julia Woerz1 INTRODUCTION 16.1 In this chapter I will focus on aspects of competitiveness that are not related to exchange rates, namely macroeconomic and structural features of an economy that determine its relative standing in the global economic environment. As pointed out in the influential article by Krugman (1994) and in the discussion by Narula and Wakelin (1995) or Aiginger and Landesmann (2002), to cite just a few, the concept of competitiveness is ill-defined in economics when it comes to the competitiveness of entities other than individual firms, whose objective is to survive and strengthen their market position vis-à-vis their competitors. At all other levels of analysis, be it sectors, regions, or nation states, the objectives of individual agents within these entities may differ, thus making it difficult to define competitiveness unambiguously. For instance, the Organisation for Economic Co-operation and Development (OECD) defines competitiveness as ‘the ability of companies, industries, regions, nations or supranational regions to generate, while being exposed to international competition, relatively high factor income and factor employment levels on a sustainable basis’ (Hatzichronoglou, 1996). The EU employs a similar concept when defining competitiveness as output growth and high rates of employment in a sustainable environment. Given their very broad scope, these definitions encompass two – in the short run potentially conflicting – objectives of a nation/region/industry: generating high factor income while keeping employment levels high. Focusing mainly on the country but sometimes also on the industry level in this...

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