This thesis examines the relationship between the real exchange rate and trade balance in eight countries with different level of development for the period 1991- 2012. Using merely exchange rate to improve the trade balance refers to price- competitiveness and relies on the satisfaction of Marshall-Lerner condition. Additionally, we articulate the influence of other underlying factors, defined as "non- price competitiveness", proxied with capital stock variable. A Vector Error Correction Model, based on Johansen's Methodology was implemented in our two econometric specifications. The key findings of the classical trade model indicate that M-L condition is met in five countries and devaluation of domestic currency would improve their trade balance in long run. VECM results from second model, which extended the traditional imperfect substitutes framework to include non-price competitiveness factor, shows pronounced influence of product quality on trade balance, capital stock variable being significant in most of the cases. The results show that trade balance reacts to both changes in relative prices and product differentiation, thus non-price competitiveness factors must not be neglected by policy makers. Our findings also indicate the existence of J-curve pattern, as reflected by short-run...

The introduction of the Euro in 1999 has led to significant economic divergences among European countries, particularly between Northern and Central European nations like Germany and Austria, and Mediterranean countries such as France and Italy. These divergences are prominently reflected in trade imbalances. This dissertation investigates the primary drivers of these economic disparities, focusing on the role of international competitiveness. Competitiveness, defined as a nation's ability to market its products globally, is analyzed through both price and non-price factors. The research highlights several methodological challenges in assessing trade flows and competitiveness. Key findings indicate that price competitiveness, measured through unit labour costs, significantly impacts export performance. Empirical evidence reveals a negative export elasticity to prices in the European context, emphasizing the importance of cost competitiveness even for high-tech sectors. Non-price competitiveness factors, although less robust in empirical models, contribute to a comprehensive narrative when assessed descriptively. The dissertation’s contributions enrich the debate on intra-European trade imbalances, particularly through comparative analyses of Germany and Italy. The findings suggest that Germany’s export success is strongly linked to price competitiveness, while Italy’s weaker performance is due to deteriorations in both price and non-price competitiveness. These insights underline the necessity for economic policies to prioritize cost competitiveness as a determinant of industrial success. In conclusion, this dissertation provides a clearer understanding of the complex factors influencing international trade dynamics within the Eurozone, offering a foundation for future research to explore causal relationships and further investigate non-price competitiveness.:List of contents Preface of the Author i Overview of Research Papers iii List of Tables iv List of Figures v I. Executive Summary 1 1.1 Introduction 1 1.2 Background and Literature Review 2 1.2.1 Cumulative causation and export-led growth 2 1.2.2 The Kaldor paradox and the discovery of non-price competitiveness 3 1.2.3 The case of Germany and Italy 5 1.3 Presentation of Research Articles 7 1.3.1 Idea 7 1.3.2 Shared methodological framework 8 1.3.3 Summary of Research Article I 8 1.3.4 Summary of Research article II 10 1.3.5 Summary of Research article III 11 1.4 Conclusion 12 1.4.1 Main results 12 1.4.2 Contribution to the European debate 13 1.4.3 Closing remarks 14 II. Research Articles 15 2.1 Article I: The Challenging Estimation of Trade Elasticities: Tackling the Inconclusive Eurozone Evidence 15 2.1.1 Introduction 15 2.1.2 The empirical export equation 16 2.1.3 The unreliable price coefficient 21 2.1.4 Inferential Evidence 26 2.1.5 Conclusion 33   2.2 Article II: Competing for Manufacturing Value Added: How Strong is Competitive Cost Pressure on Sectoral Level? 35 2.2.1 Introduction 35 2.2.2 Background 36 2.2.3 Empirical approach 39 2.3.4 Results 43 2.3.5 Conclusion 51 2.3. Article III: Assessing the Role of Non-Price Factors: Shedding New Light on the European Competitiveness Puzzle 52 2.3.1 Introduction 52 2.3.2 Non-price competitiveness: Meaning, proxies and procedural Issues 53 2.3.3 Empirical Evidence 57 2.3.4 Discussion 70 2.3.5 Conclusion 74 References 76 Appendix I i Appendix II viii Appendix III xvii

This thesis investigates the role of price and non-price competitiveness factors using a relative export price index, introduced by Benkovskis and Wörz (2016), that is adjusted for changes in quality and taste. First, we replicate their model employing an updated dataset, confirming previous results. Then, the framework is used to study the recent developments in the Europe's oil product market. Given the saturation of the market, decreasing demand, and converging prices, importance of non-price competitiveness factors, such as quality, increases. The results suggest that the problems of the underinvested oil downstream industry in Northwestern European producers are caused not only by decreasing aggregate demand, high costs, and low margins, but by non-price competitiveness factors as well. We find profound improvements in product quality in CEE countries, following substantial investments into the sector and market consolidation. Both regions are at risk of rising imports of high-quality products from the Middle East, Russia and USA. This thesis provides a comprehensive picture of price and non-price competitiveness developments of all players in the highly competitive European oil downstream market.

Cette thèse s’interroge sur les déterminants des divergences de performances commerciales au sein de la zone euro à travers quatre études empiriques. La première revient sur l’impact des spécialisations sur les performances à l’exportation, à l’aide d’une étude dynamique des avantages comparatifs et d’une analyse à parts de marché constantes. La seconde introduit une mesure élargie de la compétitivité structurelle dans la modélisation des équations d’exportation traditionnelles à travers l’étude d’un indicateur composite de compétitivité. La troisième étudie le lien entre investissements directs à l’étranger et performances commerciales dans les pays de la zone euro par le biais de tests de causalité en panel hétérogène et d’équations de gravité. Enfin, la dernière partie de cette thèse revient sur les stratégies d’internationalisation de la production et leurs conséquences sur les performances commerciales des pays à travers l’étude du comportement des constructeurs automobiles européens. Les meilleures performances de l’Allemagne ne proviennent pas uniquement de sa compétitivité-coût. L’innovation accrue de ses produits, ses infrastructures, sa politique visant à diminuer les coûts pour ses entreprises via un accès privilégié au crédit et une politique fiscale avantageuse couplées à l’accroissement de la fragmentation de sa production expliquent sa « surperformance » sur le marché mondial. Au contraire, les entreprises françaises ont souffert de la hausse des coûts salariaux dans le pays mais également du manque d’innovation de leurs produits et de leurs stratégies de délocalisation totale de la production. / This thesis is composed of four empirical studies investigating the determinants of export performance discrepancies in the Euro area. The first study evaluates the impact of specialization on export performances relying on a dynamic study of the comparative advantages and a constant market share analysis. A second chapter introduces a new enlarged measure of competitiveness in the traditional export equations based on the study of a composite competitiveness indicator. The third chapter examines the relationship between foreign direct investment (FDI) and Euro area export performances using both causality tests in a heterogeneous panel and gravity equations. The final part of this thesis discusses the impact of internationalization of production’ strategies on country’s export performances focussing on an analysis of European car manufacturers’ behaviour. The strong German export performance does not only result from its cost competitiveness. The innovation of its products, its infrastructures, its policies aiming at reducing costs for its firms through access to credit and a favourable fiscal policy associated with the increasing fragmentation of its production explain its "over-performance" on the world market. On the contrary, rising labour costs, the lack of product innovation and a strategy of extensive production offshoring hurt the competitiveness of French firms.