Wage versus currency devaluation, price pass-through and income distribution: a comparative input–output analysis of the Greek and Italian economies

Abstract

Abstract Using input–output data from Symmetric Input–Output Tables for the year 2010 and relevant price models, this paper provides empirical estimations of medium- and long-run effects of wage and currency devaluations on international price competitiveness and income distribution for two ‘PIIGS economies’, i.e. Greece and Italy. The findings reveal certain differentiated socio-technical production conditions in the economies under consideration casting doubt on the effectiveness of demand-switching policy measures implemented in the post-2010 Eurozone economy. At the same time, however, wage devaluation is found to be a comparatively slow and inefficient process to improve international price competitiveness in the medium-run.

Keywords

• Income distribution
• Input–output price models
• International price competitiveness
• PIIGS economies
• Price pass-through
• Wage and currency devaluations