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Wiley InterScience | ||
  World EconomyVolume 29 Issue 9, Pages 1157 - 1175 Published Online: 8 Sep 2006 Journal compilation © 2010 Blackwell Publishing Ltd
Abstract | References | Full Text: HTML, PDF (Size: 302K) | Related Articles | Citation Tracking  The Pathological Export Boom and the Bazaar Effect: How to Solve the German Puzzle Copyright © 2006 The Author Journal compilation © 2006 Blackwell Publishing Ltd ABSTRACTGermany is the laggard of Europe, yet the country is world champion in merchandise exports. The paper tries to solve this theoretical and empirical puzzle by diagnosing a 'pathological export boom' and a 'bazaar effect'. Excessively high wages defended by unions and the welfare state against the forces of international low-wage competition destroy too big a fraction of the labour-intensive sectors and drive too much capital and labour into the capital-intensive export sectors, causing both unemployment and excessive value added in exports. Moreover, excessive wages induce too much outsourcing of upstream production activities, which implies that export quantities grow too much in relation to value added contained in exports. Finally, excessive wages cause capital flight resulting in a too large current account surplus. |
