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Decomposition and Dynamics of Unit Labor Costs in a Context of International Fragmentation of Production: Evidence from the German Automotive Sector

Author

Listed:
  • Manuel Gracia Santos
  • Miguel Montanyá
  • María J. Paz

Abstract

Conventional analysis has sought to explain the determinants of price competitiveness by way of national factors, but given the current degree of international fragmentation of production, a more holistic perspective needs to be explored. This document develops a specific proposal that permits the indicator on vertically integrated unit labor costs (VIULCs) to be broken down into its fundamental components; also, the evolution of this indicator is explored for the German automotive sector, to determine which component might best elucidate the evolution of the VIULCs. The results show a decrease in VIULCs deriving from the German sector as well as from its suppliers, confirming the relevant effects of outsourcing and offshoring strategies. Moreover, wage restraint among suppliers coupled with productivity gains are found to explain the overall reduction in VIULCs. JEL classification : P16, F15, F23,

Suggested Citation

  • Manuel Gracia Santos & Miguel Montanyá & María J. Paz, 2024. "Decomposition and Dynamics of Unit Labor Costs in a Context of International Fragmentation of Production: Evidence from the German Automotive Sector," Review of Radical Political Economics, Union for Radical Political Economics, vol. 56(4), pages 576-596, December.
    • Handle: RePEc:sae:reorpe:v:56:y:2024:i:4:p:576-596
    DOI: 10.1177/04866134241258292
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    More about this item

    Keywords

    unit labor cost; international production; automotive sector;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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