Sectoral leadership in international competitiveness: the Portuguese case

Abstract

The purpose of this article is to identify the type of labour and the sectors where labour productivity should be improved to elevate the international competitiveness of Portugal. A static multisectoral general equilibrium model, with multinational and single-country versions, is used. This model permits the identification of sectors that are leaders in competitiveness improvement. In some countries, traditional export sectors are expected to assume this role, whereas the suppliers of intermediate goods possess the potential to fulfil this function in other countries. The results of this study show that the choice of sector and the type of labour are crucial for improving the international competitiveness of the Portuguese economy. The criterion used to measure competitiveness also has an important role. Whereas multifactor productivity is especially increased when the promotion of labour competencies occurs in import and export sectors, population welfare has a greater impact, with the generalized improvement of unskilled labour competencies.

Keywords:

• general equilibrium models
• competitiveness
• productivity
• skills

JEL Classification:

• D58
• J24
• D24

Acknowledgements

I gratefully acknowledge Fundação Ciência Tecnologia (FCT), programme FEDER/POCI 2010, Programa Operacional Ciência Tecnologia Inovação (POCTI) and the Center for Advanced Studies in Management and Economics (CEFAGE) for their partial financial support. I also thank Renato Flôres, Thomas Rutherford, Sherman Robinson, Ali Bayar, Renger van Nieuwkoop, Olga Ivanova, Scott Macdonald and, especially, Cristina Mohora for their helpful comments. However, I am alone responsible for any remaining errors.

Notes

¹ A matrix of equivalence was created so that this aggregation could be applied to the Global Trade Analysis Project (GTAP) database.

² Germany, Austria, Belgium, Denmark, Spain, Finland, France, Greece, The Netherlands, Italy, Ireland, Luxembourg, the United Kingdom and Sweden.

³ Cyprus, Slovenia, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Czech Republic, Slovakia, Romania and Bulgaria.

⁴ Capital is a composite factor that aggregates capital, natural resources and land.

⁵ The subscripts r and s mean that the variable is disaggregated by regions and sectors, respectively.

⁶ See Table A1, where all equations of the model can be found.

⁷ Or subsidies, if their values are negative.

⁸ Capital flows are not included in the equation because it is assumed that all factors are immobile between countries. In addition, structural funds and other EU funds are not considered. These issues are left for future developments of the model.

⁹ These consumption levels were determined from the Family Budget Inquiry, which had been carried out by the INE.

¹⁰ In this case, the value –0.1 for the regions EU 14 and ROW, the value –0.08 for Portugal and the value –0.05 for EU 12 are used.

¹¹ The reason for this consideration is the year of the benchmark database, 2001.

¹² The productivity of different types of labour, multifactor productivity and unit labour costs.