NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Euro and Firm Restructuring

Matteo Bugamelli, Fabiano Schivardi, Roberta Zizza

NBER Working Paper No. 14454
Issued in October 2008
NBER Program(s):   IO   LS   PR

We test whether and how the adoption of the euro, narrowly defined as the end of competitive devaluations, has affected member states' productive structures, distinguishing between within and across sector reallocation. We find evidence that the euro has been accompanied by a reallocation of activity within rather than across sectors. Since its adoption, productivity growth has been relatively stronger in country-sectors that once relied more on competitive devaluations to regain price competitiveness. This effect is robust to potential omitted-variable bias and correlated effects. Firm-level evidence from Italian manufacturing confirms that low-tech businesses, which arguably benefitted most from devaluations, have been restructuring more since the adoption of the euro. Restructuring has entailed a shift of business focus from production to upstream and downstream activities, such as product design, advertising, marketing and distribution, and a corresponding reduction in the share of blue collar workers.

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Document Object Identifier (DOI): 10.3386/w14454

Published: The Euro and Firm Restructuring, Matteo Bugamelli, Fabiano Schivardi, Roberta Zizza. in Europe and the Euro, Alesina and Giavazzi. 2010

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