Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/99030
Authors: 
Ordóñez, Javier
Sala, Hector
Silva, José I.
Year of Publication: 
2014
Series/Report no.: 
IZA Discussion Papers 8258
Abstract: 
We examine the trajectories of the real unit labour costs (RULCs) in a selection of Eurozone economies. Strong asymmetries in the convergence process of the RULCs and its components – real wages, capital intensity, and technology – are uncovered through decomposition and cluster analyses. In the last three decades, the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) succeeded in reducing their RULCs by more than their northern partners. With the exception of Ireland, however, technological progress was weak; it was through capital intensification that periphery economies gained efficiency and competitiveness. Cluster heterogeneity, and lack of robustness in cluster composition, is a reflection of the difficulties in achieving real convergence and, by extension, nominal convergence. We conclude by outlining technology as the key convergence factor, and call for a renewed attention to real convergence indicators to strengthen the process of European integration.
Subjects: 
real unit labour costs
Eurozone
real wages
capital intensity
technology
JEL: 
F43
F62
O47
O52
Document Type: 
Working Paper

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