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The Global Operations of European Firms : S omething to learn on South vs. North Europe?

The Global Operations of European Firms : S omething to learn on South vs. North Europe?. Giorgio Barba Navaretti , University of Milan and Centro Studi Luca d’Agliano. Conference on the Triggers of Competitivness National B ank of Belgium , Brussels , December 6, 2011.

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The Global Operations of European Firms : S omething to learn on South vs. North Europe?

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  1. The Global Operations of EuropeanFirms:Something to learnon South vs. North Europe? Giorgio Barba Navaretti, University of Milan and Centro Studi Luca d’Agliano Conference on the Triggers of Competitivness National Bank of Belgium, Brussels, December 6, 2011

  2. EU growth, competitiveness and current account imbalances Capital inflows in the right direction, but not to the best use Sources: European Commission and Eurostat. Notes: Countries are ranked according to GDP per capita in 1999. GDP per capita, relative to the EA, in PPS.

  3. Externalimbalances: Thingschange source: Barues, Lawson, Radziwill and Lane, OECD WP

  4. Macro Macro and then?? • Debate on ’competitiveness’: macro indicators • Real Effective Exchange Rates (REER) • Unit LaborCosts (ULC) • Export shares • Current Account (in % of GDP) • INDUSTRY?

  5. Sectors? Source: OECD and IMF. Data for 2010, exceptSpain 2009

  6. Macro Macro and then?? • BUT • Firms? Nations and sectors do not produce, do not trade, do not compete; it is firms that produce trade and compete.

  7. Avergefirmsize

  8. EU-EFIGE/BRUEGEL-UNICREDIT DATASET • Before no statistical information on European firmsharmonized across country. • Detailed information of international operations combined with all other key firm characteristics (including balance sheet data 2010 targeting year 2008 (some 2009)

  9. THE EFIGE SECONDPOLICY POLICY REPORT“The Global Operations of the EuropeanFirms”?MAIN FINDINGS • Differencesin country patterns: • German and French more sophisticated internationalisers • Spain and Hungarylaggingbehind • Italians, higher export propensity • Firmscharacteristicsaffectinternationalisationpatterns in a remarkablysimilar way acrosscountries • Patternsexplainedmostly by firmcharacteristics • => Country differbecausetheyhave a different industrial structure

  10. WHAT EXPLAINS EXPORT STATUS? FIRMS’ FEATURES

  11. NUMBER OF DESTINATIONS OF EXPORTS MANY FIRMS IN FEW COUNTRIES, FEW FIRMS IN MANY COUNTRIES Policy: How to shiftthesedistributionsto the right?

  12. THE GAMES GET TOUGHER GLOBAL PRODUCTION Few do it, but who does it does it a lot French and Germans more than the others Firm characteristics, the prevailing factor again

  13. A SIMPLE DECOMPOSITION • To quantify the importance of size and sector, apply to ITA, FRA and SPA the German structure (Germany only as benchmark; no suggestion to become German!) • Keep fixed a country’s total employment in the manufacturing sector and shift workers across firms and sectors to replicate German structure • How? Changing the weighting scheme as if sample firms in ITA, FRA and SPA were drawn from German population • Importantly, keep a country’s export propensity and export share by size and sector classes

  14. EXPORT RISE IF WE APPLY GERMAN INDUSTRIAL STRUCURE, MORE IN ITALY AND SPAIN THAN IN FRANCE (Number of workers constant) Italy: Most of the action is size France and Spain, industry matters most

  15. IMPLICATIONS • Industrial structure (distribution of firmcharacteristics)important for tradeimbalances • Caveat: export notnecessarilyNirvana • => Butclearly export competitivenessreflectsefficiency and growth of industry and viceversa • Germanmiracle: didGermany have an industrial structureable to respond to changes in incentives?? • = > Mittelstandt ? Fraunhofer? • For othercountriesisfirmsgrowthimportant (Italy)? • Nothing can be forced, butimpediments to growth? And doesreallocation of resourcesfavourproductivitygrowth?

  16. USEFUL TO DECOMPOSE FIRMS DYNAMICS (2001-08) Columns sum to 100 Upsizers: firmsmoving up to higherdecilesbetween 2001 and 2008 Downsizers: firmsmovingdown to lowerdecilesbetween 2001 and 2008 Stable: firmsnotchanging decile between 2001 and 2008 Source: EFIGE-Amadeus data

  17. How doesfirmdynamicsaffect aggregate productivity?

  18. CONCLUSIONS • Addressing the issue of industrial structuresisessential for competitiveness and growth and to tackle North-South balances in the Euro area. • Possiblethatpresentstructure of incentivesin deficit countriesdoesnotfavoura’growthconducive’ reallocation of resources • Thiscannot be sorted out just with sectoral and macro policies

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