Is There Social or Monetary Dumping in the European Union? Manufacturing Competitiveness in Central and Eastern Europe

Objective: The aim of this article is to define and estimate the extent of different possible forms of macroeconomic dumping in the manufacturing industry within the European single market, performed by five major Central Eastern European countries (Bulgaria, Czech Republic, Hungary, Poland and Romania; CEE-5) in the aftermath of the Eastern EU enlargement (2004-2016). Research Design & Methods: Based on the appropriate definition and decomposition of Nominal Unit Labour Cost in Purchasing Power Parity, CEE-5 social and monetary dumping has been analysed by panel data econometrics and descriptive statistics methods. Findings: Macroeconomic dumping is a determinant driver of CEE-5 manufacturing cost comparative advantages, but it has a negative relation to progress in labour productivity. The analysis highlights two distinct competitive strategies, one performed by the Czech Republic and Poland mainly based on social dumping, while the other, performed by Hungary, Bulgaria and Romania, primarily focused on monetary dumping. Implications & Recommendations: Macroeconomic dumping could represent only a temporary measure to promote structural convergence, failing which it becomes an obstacle to economic modernisation. Contribution & Value Added: The article presents an accurate overview of macroeconomic dumping within the EU by using an original methodology able to differentiate between different forms of macroeconomic dumping.