C Catalunya
—Lo—Lombardia
—■— Baden-Württemberg
Figure 4: Exports as a percentage of GDP
in the three regions (1995-2002)
(Source: Regional Statistical Offices - Calculus: Authors)
♦ Catalunya
—■— Baden-Württemberg
—⅛— Lombardia
Figure 5: Exports per-capita in the
three regions (1995-2002) (€ thousands)
(Source: Regional Statistical Offices - Calculus: Authors)
3.2.3 Unit labor costs
Unit labor costs are one of the indicators to assess productivity. It is calculated by dividing
average compensation of employees (wages plus benefits) by nominal added value. Therefore, this
indicator ranges from 0 to 1. The lower the indicator, the higher the productivity.
We computed the unit labor costs for two sectors that are the most relevant for FDI flows, over
a period (1995-2001) for which data is available. In the first graph, we present the unit labor costs in
manufacturing in the three regions (Figure 6). Two regions (Catalunya and Lombardia) have relatively
similar productivity performance. The Catalan manufacturing industry is the least performer and its
productivity is slightly declining. The “outperformed” is Baden-Württemberg, which even managed to
improve its productivity level in the ultimate years.
In the sector of services, the variance of performance is lower and the productivity level is
much higher than in manufacturing. This is not surprising since there is much less international
competition in services than in manufacturing, leaving opportunities for higher markups. The
interregional comparison distinguishes two frontrunners (Baden-Württemberg and Lombardia) from
Catalunya, which is lagging behind. In all the three regions, the productivity level is declining over
that period, indicating perhaps that markups are being trimmed by higher competition.
To learn more about the productivity performance of each region over this period we
constructed a unit labor cost index for each region. This index is set at 100 in 1995 for all regions.
Then we calculate this index in the subsequent years and compare them to the first one. In the
manufacturing sector, Baden-Württemberg experienced a strong degradation of its manufacturing
productivity before reversing the trend in the ultimate years as already seen in the previous graph.
Nevertheless its productivity in 2001 is lower than in 1995. For Lombardia, the productivity has little
evolved. The productivity of the Catalan manufacturing sector is declining over the period. In the
sector of services, we observe a general degradation of productivity in all regions as previously
(Figure 9). The productivity levels of Catalunya and Lombardia in 2001 are very close while the
decline in productivity in Baden-Württemberg has gone out of control.
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