Publications - Working Papers IER SAS

The recent development in the Slovak economy erased a significant competitive advantage of manufacturing – low labour cost. The paper analyses the driving factors of rising unit labour costs in the manufacturing sector. The aim is to explain why this traditional competitive advantage was lost unexpectedly quickly in the V4 group of countries and why this phenomenon was particularly pronounced in Slovakia. The paper identifies the factors that caused the strong increase in labour costs and the factors that also caused the slowdown in productivity growth. The decomposition of ULC dynamics has shown that the primary problem in the case of Slovakia is a very significant slowdown in labour productivity growth.