Assessing the role of non-price factors: Shedding new light on the European competitiveness puzzle

Abstract

Identifying major driving factors of a country's export performance is challenging. In particular, existing empirical evidence on the role of non-price competitiveness (NPC) remains inconclusive and fragmented. This study aims to address this issue by examining the consistency and validity of NPC's established empirical measures within a European context. I employ both indirect NPC approaches and proxy measures to econometrically assess the NPC contribution to explaining exports. The analysis is based on a dataset encompassing ten major European countries over the period 1995–2019, using the income-and-price-elasticity framework. This study shows that there is no preferable method to assess NPC. The findings underscore the need to consider multiple indicators when conducting a thorough analysis of a country's NPC, as each provides distinct insights. The evidence generated reveals a consistent deterioration in NPC for Germany, France, and Italy. Conversely, Portugal has witnessed enhancements in key NPC factors, while mixed evidence arises for Austria, Belgium, Finland, the Netherlands, Portugal, and Spain.