DATA OF: ABSOLUTE COST ADVANTAGE AND SECTORAL COMPETITIVENESS: EMPIRICAL EVIDENCE FROM NAFTA AND THE EUROPEAN UNION

Following the theory of absolute cost advantage, our aim is to verify the hypothesis that, during 2000-2014, the real exchange rates (REERs) of the German and the US manufacturing sectors vis-à-vis their EU-28 and NAFTA partners, respectively, have been governed by the relative vertically integrated unit labour costs (RVIULCs) and the intrasectoral gap of the rate of profit (Rs). Using panel cointegration techniques, we elaborate three econometric models. The first for the NAFTA countries, where the United States (US) is taken as the reference (national) country; the second for the EU-28 with Germany as the national country; the third one agglutinates NAFTA and EU-28, where we consider US as the national country. The results suggest that there exists a stable long-run relationship between REERs, RVIULCs and Rs. Furthermore, cointegration vectors show that the competitiveness of both US and German manufacturing sectors is positively associated with the decrease in unit costs of production, while it is negatively related to the increase in the intrasectoral profitability gap.