The price vs. non-price competitiveness conundrum: a post-Keynesian comparative political economy analysis

By Walter Paternesi Meloni

PKES Working Paper 2109

June 2021

Recently, several post-Keynesian scholars have entered the debate on comparative political economy. Within this approach, the research on different demand-led growth strategies converges on the idea that differentiated models of capitalism are finding the engines of growth in debt-financed domestic demand or foreign demand, alternatively. Nonetheless, some layers of disagreement emerge when investigating the reasons for a country’s export success, particularly concerning the European core-periphery dualism. On the one side, some studies emphasise the role of price and cost competitiveness. On the other side, other scholars ascribe the huge performance of export-oriented countries to non-price factors (e.g., product quality and diversification). The purpose of this paper is to deepen this specific debate from a post-Keynesian political economy perspective. Besides overviewing the existing literature, we extend Kohler and Stockhammer’s (2021) work on price and non-price competitiveness as growth drivers to export dynamics. Our evidence indicates that both price and non-price competitiveness differentials had been significant in shaping export flows before the outbreak of the great financial crisis of 2007-08. We also observe that methodological issues and large heterogeneity across countries belonging to different models may alter the overall picture on the relative relevance of price and non-price factors. Therefore, we conclude that country-specific analyses based on the estimation of well-specified export equations, explicitly encompassing non-price competitiveness, are necessary to assess the sensitivity of export to price and cost factors.

Keywords: post-Keynesian economics; comparative political economy; export; price competitiveness; non-price competitiveness

JEL classification: E02 O51 P16 P51