Nonprice components of market share gains –
Evidence for EU countries
Julia Wörz
OeNB, Foreign Research Division
Based on joint research with Konstantīns Beņkovskis
Latvijas Banka and Stockholm School of Economics, Riga
CEEI-CFEE
Warsaw, October 15-16, 2015
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Outline
• Measurement of competitiveness
• Our measure: decomposition of global market share changes
• Description of the database
• Results for traditional gross exports
• Results for domestic value added in exports
• Conclusions
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Measurement of competitiveness
 Broad approach: compare
macroeconomic performance and
overall living standards across
countries (focus on productivity)
Market share gains despite real appreciation?
change in REER
0.8
0.7
0.6
0.5
 Narrow approach: countries’ ability to
sell their products in world markets
(focus on price and cost measures)
0.4
0.3
0.2
0.1
0.0
-0.1
 Comprehensive index (i.e. Global
Competitiveness Report) vs many
indicators (CompNet).
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-3-
-0.2
-0.3
-1.000
-0.500
0.000
0.500
1.000
1.500
change in global market share
Sources: Eurostat, UN Comtrade, authors' calculations.
Measurement of competitiveness
 Broad approach: compare
macroeconomic performance and
overall living standards across
countries (focus on productivity)
Market share gains despite real appreciation?
change in REER
0.8
CESEE
0.7
0.6
0.5
 Narrow approach: countries’ ability to
sell their products in world markets
(focus on price and cost measures)
0.4
0.3
0.2
0.1
0.0
-0.1
 Comprehensive index (i.e. Global
Competitiveness Report) vs many
indicators (CompNet).
www.oenb.at
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-0.2
-0.3
-1.0
-0.5
0.0
0.5
1.0
1.5
change in global market share
Sources: Eurostat, UN Comtrade, authors' calculations.
Competitiveness
• Competitiveness is a multifaceted and relative concept.
• Measurement is not enough, determinants matter.
• We propose a comprehensive measure, theoretically derived from
maximizing consumer utility; empirical application based on highly
disaggregated trade data and global input-output data.
• We use changes in market shares (outcome based) and decompose
them into various input factors:
–
–
–
–
prices and costs
nonprice factors (product quality, labeling)
diversification, new competitors, shifts in world demand
integration into “global value chains”
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Decomposition of market shares
Changes in market share of
country k in the world market
New markets
(extensive margin)
Growth in existing markets
(intensive margin)
Changes within bilateral trade
relationship
Changes in
relative prices
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Changes in other
nonprice factors
(taste or quality)
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Shift in world import
structure
Changes in
competition (set of
competitors)
Description of the database
• UN Comtrade
– highly disaggregated trade flows (HS 6-digit level,
~5,000 products)
– we calculate unit values
– 188 importers worldwide
• World Input-Output Database (WIOD)
– additional source to assess domestic value added in exports
– 59 products (CPA classification)
– 40 exporting countries
• Results for 25 EU Member States (excl. BE, LU, HR)
• Annual data 1996 to 2011
• Focus on final products
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Winners and losers in global market shares
• CESEE EU Member States
gained market shares
Change in world market shares, 1996-2011
EE
LV
SK
CZ
LT
PL
HU
RO
BG
IE
CY
AT
SI
DE
MT
FI
ES
NL
SE
DK
FR
GR
IT
PT
UK
%
-1.0
• Austria and Germany could
maintain their global market
shares
• Remaining EU Member States
lost global market shares ...
-0.5
Source: authors' calculations.
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0.0
0.5
1.0
• ... in particular the Southern
European EU Member States
and UK
1.5
Export market shares
-8-
Decomposition of market share changes – losers
• Overall deteriorating nonprice
competitiveness
Changes in world market shares, 1996-2011
percentage points, export market share in %
0.6
0.4
• Changes in global demand
structures unfavorable for
Western EU countries
0.2
0.0
-0.2
• Positive impact of
diversification into new markets
-0.4
-0.6
-0.8
-1.0
UK
PT
IT
GR
FR
Extensive margin
Nonprice competitiveness
Shift in demand structure
Export market shares
DK
SE
NL
ES
FI
Price competitiveness
Set of competitors
not explained
Source: authors' calculations.
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• Mixed results for price
competitiveness
Decomposition of market share changes – “maintainers”
Changes in world market shares, 1996-2011
• Improved price competitiveness
of Austria, Cyprus and Germany
percentage points, export market share in %
1.0
0.8
• Extensive margin strongly
relevant for small/catching-up
economies
0.6
0.4
0.2
0.0
-0.2
• Again negative impact from
changes in global demand
structures
-0.4
-0.6
-0.8
-1.0
MT
DE
Extensive margin
Nonprice competitiveness
Shift in demand structure
Export market shares
SI
AT
CY
Price competitiveness
Set of competitors
not explained
Source: authors' calculations.
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Decomposition of market share changes – winners
Changes in world market shares, 1996-2011
• Diversification into new markets
plays an important role
percentage points, export market share in %
2.5
2.0
• Strong gains in nonprice
competitiveness (quality, taste)
1.5
1.0
0.5
• Deteriorating price
competitiveness (related to
catching-up)
0.0
-0.5
-1.0
-1.5
IE
BG
RO
HU
PL
Extensive margin
Nonprice competitiveness
Shift in demand structure
Export market shares
LT
CZ
SK
LV
• Again, changes in global
demand patterns were not
addressed
EE
Price competitiveness
Set of competitors
not explained
Source: authors' calculations.
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Decomposition of domestic value added in market shares
Changes in market share of
country k in the world market
New markets
(extensive margin)
Growth in existing markets
(intensive margin)
Changes within bilateral trade
relationship
Changes in
relative prices
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Focus only on domestic
value added in exports
Changes in other
nonprice factors
(taste or quality)
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Shift in world import
structure
Changes in
competition (set of
competitors)
Winners and losers in global market shares
Change in world market shares, 1996-2011
EE
LV
SK
CZ
LT
PL
HU
RO
BG
IE
CY
AT
SI
DE
MT
FI
ES
NL
SE
DK
FR
GR
IT
PT
UK
%
-1.0
• But smaller gains for some
strongly integrated CESEE
countries
• Smaller losses for Greece,
Portugal and UK
• Yet, the story differs ...
-0.5
Source: authors' calculations.
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• Similar outcome: same
countries gain or lose market
shares
0.0
0.5
1.0
1.5
Export market shares
VAX market shares
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Market share losers under the value added view
Cumulative changes in gross and value added export market shares, 1996-2011 - losers
percentage points, market share in %
0.6
0.4
0.2
0.0
-0.2
-0.4
-0.6
-0.8
-1.0
gross X
VA X
United Kingdom
gross X
VA X
gross X
Portugal
VA X
Italy
Greece
VA X
gross X
VA X
France
Extensive margin
Price competitiveness
Nonprice competitiveness
Shift in production chains
Set of competitors
Shift in demand structure
not explained
Export market shares
Source: authors' calculations.
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gross X
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Market share winners under the value added view
Cumulative changes in gross and value added export market shares, 1996-2011 - winners
percentage points, market share in %
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
gross X
VA X
HU
gross X
VA X
PL
VA X
CZ
gross X
VA X
EE
Extensive margin
Price competitiveness
Nonprice competitiveness
Shift in production chains
Set of competitors
Shift in demand structure
not explained
Export market shares
Source: authors' calculations.
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gross X
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Conclusions
 Price competitiveness is not the culprit, almost all EU economies show
improvements in the value added view
 GVC integration beneficial for catching-up and detrimental for advanced
economies
 Apparent gains in nonprice competitiveness by CESEE arise largely from
relocating production stages (processing higher quality inputs)
 Exploring new markets more important for catching-up economies –
when will this window of opportunity close?
 EU Member States did not adapt to changing global demand patterns
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Appendix
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Conventional vs value added market shares – losers
Changes in world market shares, 1996-2011
Changes in value added in exports, 1996-2011
percentage points, export market share in %
1.5
percentage points, market share in %
1.5
1.0
1.0
0.5
0.5
0.0
0.0
-0.5
-0.5
-1.0
-1.0
-1.5
-2.0
-1.5
UK
PT
IT
GR
FR
Extensive margin
Nonprice competitiveness
Shift in demand structure
Export market shares
Source: own calculations.
www.oenb.at
DK
SE
NL
ES
Price competitiveness
Set of competitors
not explained
UK
FI
PT
IT
GR
FR
Extensive margin
Nonprice competitiveness
Set of competitors
not explained
Source: own calculations.
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DK
SE
NL
ES
Price competitiveness
Shift in production chains
Shift in demand structure
VAX market shares
FI
Conventional vs value added market shares – “maintainers”
Changes in world market shares, 1996-2011
Changes in value added in exports, 1996-2011
percentage points, export market share in %
1.0
percentage points, market share in %
1.0
0.8
0.8
0.6
0.6
0.4
0.4
0.2
0.2
0.0
0.0
-0.2
-0.2
-0.4
-0.4
-0.6
-0.6
-0.8
-0.8
-1.0
-1.0
MT
DE
Extensive margin
Nonprice competitiveness
Shift in demand structure
Export market shares
Source: own calculations.
www.oenb.at
SI
AT
MT
CY
Price competitiveness
Set of competitors
not explained
DE
Extensive margin
Nonprice competitiveness
Set of competitors
not explained
Source: own calculations.
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SI
AT
CY
Price competitiveness
Shift in production chains
Shift in demand structure
VAX market shares
Conventional vs value added market shares – winners
Changes in world market shares, 1996-2011
Changes in value added in exports, 1996-2011
percentage points, export market share in %
2.5
percentage points, market share in %
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
-0.5
-0.5
-1.0
-1.0
-1.5
-1.5
IE
BG
RO
HU
PL
Extensive margin
Nonprice competitiveness
Shift in demand structure
Export market shares
Source: own calculations.
www.oenb.at
LT
CZ
SK
LV
Price competitiveness
Set of competitors
not explained
IE
EE
BG
RO
HU
PL
Extensive margin
Nonprice competitiveness
Set of competitors
not explained
Source: own calculations.
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LT
CZ
SK
LV
Price competitiveness
Shift in production chains
Shift in demand structure
VAX market shares
EE