The Euro and Firm Restructuring
The Euro and Firm Restructuring
One of the main drivers of European integration was the idea that a more integrated European economy would promote economic efficiency, allowing countries to fully exploit their competitive advantages, fostering factor mobility and increasing allocational efficiency. The euro was a crucial milestone along this path. The productivity growth has been relatively stronger in those countries and sectors that relied more on competitive devaluations to regain price competitiveness before the euro was adopted. This finding is confirmed by an analysis of firm-level data from the Italian manufacturing sector. This study finds that low-tech businesses, which arguably benefited most from devaluations, have been restructuring more since the adoption of the euro. Restructuring has entailed a shift of business focus from production to upstream and downstream activities, such as product design, advertising, marketing, and distribution, and a corresponding reduction in the share of blue-collar workers.
Keywords: allocational efficiency, restructuring, euro, European integration, blue-collar workers
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