Abstract

CUEVAS AHUMADA, Víctor Manuel. International Competitiveness, Productivity and Unit Labor Costs in the Manufacturing Industry. Frontera norte [online]. 2010, vol.22, n.44, pp. 7-39. ISSN 0187-7372.

This paper explores the effects of labor productivity, the actual exchange rate and other variables on the manufacturing industry's international competitiveness (IC) during a twelve-year period: 1996-2008. To this end, we construct an ic index and estimate two generalized VAR models. The empirical evidence suggests that labor productivity influences ic to a greater extent than actual exchange rate depreciation. Furthermore, manufacturing ic increases when unit labor costs decrease; that is, when labor productivity grows faster than wages. In this way, an integral package of policy measures designed to stimulate productivity of workers may be more effective in increasing manufacturing ic than actual currency depreciation.

Keywords : International competitiveness; manufacturing industry; generalized VAR models; Mexico; industrial policy.