A RELATIVE UNIT LABOR COST: CASE OF ACCESSION COUNTRIES

In this paper, framework of the relative unit labor cost has been used in order to analyze relative competitiveness of the economic agents in Croatia and five new member countries. Unit labor costs have been calculated for Croatia, Czech Republic, Hungary, Poland, Slovakia and Slovenia. The cointegration tests and VAR methodology was used in order to estimate importance of relative unit labor costs vis-à-vis accession countries on industrial production in Croatia. Our findings suggest that relative unit labor costs (RULC-competitiveness) increased quite modestly (within the margin of error) during the observed period and that movements of RULC can explain
short run movements in industrial production of Croatia.