Manufacturing employment has steadily declined in industrialized countries since the 1970s. The Portuguese economy has followed this trend: in 2006, manufacturing employment represented 18% of total employment against 24% in 1988. Jobs lost in low technology industries account for almost 100% of the total jobs net loss (160000).
Technological change and competition from emerging countries, namely from Eastern Europe and China, have been pointed as the culprit of that job loss. However, economic theory suggests that we explore another explanation: exchange rate movements. Exchange rate changes have an immediate impact on the competitiveness of domestic goods. Between 1988-2006, Portugal abandoned the ‘crawling peg strategy’ (announced devaluations), joined the European Monetary System and was at the launch of the Euro. During that period, the Portuguese real effective exchange rate appreciated more than 20%.
The Portuguese economy is very open and, at the same time, specialized in low technology industries. In a joint work with Pedro Bação, João Cerejeira and Miguel Portela, we showed that these two characteristics have made manufacturing employment very sensitive to exchange rate movements. Moreover, we also show that competition from emerging countries has affected manufacturing employment severely.
The implication of these results is quite obvious: unless the Portuguese economy becomes a high technology economy, its competitive conditions will have to converge to those of emerging countries.
The implication of these results is quite obvious: unless the Portuguese economy becomes a high technology economy, its competitive conditions will have to converge to those of emerging countries.
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ReplyDeleteManufacturing employment has steadily declined in industrialized countries since the 1970s, reflecting significant shifts in the global economy. For innovative solutions in today's evolving market, consider the best interior fit out company in dubai.
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ReplyDeletePortugal and other industrialized nations have seen a decrease in manufacturing jobs, which emphasizes the transition from low-tech to other industries. The loss of around 160,000 jobs in low-tech industries is indicative of larger shifts in the economy. As industries change, it's important to adjust to new opportunities, just as Car Detailing Ottawa ServicesServices does to keep your car looking great even as trends change.
ReplyDeleteTechnological advancements and competition from rising economies such as Eastern Europe and China are frequently blamed for employment losses. However, economic theory argues that exchange rate swings have a direct impact on the competitiveness of domestic commodities. Portugal's real effective exchange rate increased by more than 20% between 1988 and 2006, owing to its integration into the European Monetary System and adoption of the Euro. As we explore the economic difficulties, indulge in some treats from متجر شوكليت الخبر!
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