The study entitled: “Openness, Expοrts and Wage Environment in the Greek Economy”, was conducted with the support of the A. G. Leventis Foundation Research Chair at ELIAMEP, by Theoni Kakoulidou, PhD, Athens University of Economic and Business; Sarantis Kalyvitis, Professor, Athens University of Economic and Business; Margarita Katsimi, Professor, Athens University of Economic and Business and Thomas Moutos, Professor, Athens University of Economic and Business.
Summary of the study
The low competitiveness of the Greek economy was a key factor for the breakout of the debt crisis, as well as a factor for the prolonged inability to adjust to pre-crisis levels of economic activity. The loss of international competitiveness of the Greek economy was associated with a rapid increase in labor costs in the period up to 2009.
However, the fact that the drastic reduction of unit labor costs after 2009 failed to lead to the expected increase in Greek exports, demonstrates that the reduction of labor costs alone is not able to stimulate export activity.
This study used a large microeconomic database at the level of export companies in order to highlight the most important factors determining export behavior. In this context, factors such as productivity, workforce quality, innovation, lending capacity and product promotion seem to be positively related to the companies’ export performance.
In relation to the role of the wage environment in export performance, the analysis of microeconomic data shows that:
- the average export company pays its workforce with higher wages than the average private sector company, and
- the companies with the best export performance pay higher wages and the difference is more pronounced for the wages of the specialized workforce.
The average export company also employs a significantly smaller percentage of employees who are paid with the minimum wage. That is why, according to the empirical analysis carried out in the context of the study, the reduction of the minimum wage in 2012 does not seem to have affected the export behavior of companies with employees who were paid the minimum wage.
It is worth noting, however, that after the labor market reform in 2012, there was a positive effect on the value of exports for all export companies, probably because the reform allowed export companies to deviate from the wages set out in the collective bargaining agreements.
The main conclusion that emerges from the present study is that the most decisive factor for export activity is the size of the company. Given that large enterprises export much more than small οnes, the existence of a relatively small number of large companies in Greece affects negatively the country’s export performance.
In this context, the study proposes the creation of a Greek ‘export chain’: Greek small and medium-sized enterprises (SMEs) can be suppliers of large export companies, which will form the ‘export hub’ for the promotion of Greek products worldwide. Thus, SMEs can become indirectly competitive as part of a wider production process by substituting part of the imports.
You can access the full study, in Greek, here.