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The Determinants of National Competitiveness

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  • Mercedes Delgado
  • Christian Ketels
  • Michael E. Porter
  • Scott Stern

Abstract

We define foundational competitiveness as the expected level of output per working-age individual that is supported by the overall quality of a country as a place to do business. The focus on output per potential worker, a broader measure of national productivity than output per current worker, reflects the dual role of workforce participation and output per worker in determining a nation’s standard of living. Our framework highlights three broad and interrelated drivers of foundational competitiveness: social infrastructure and political institutions, monetary and fiscal policy, and the microeconomic environment. We estimate this framework using multiple data sets covering more than 130 countries over the 2001-2008 period. We find a positive and separate influence of each driver on output per potential worker. The microeconomic environment has a positive effect on output per potential worker even after controlling for historical legacies. Using our framework we define a new concept, global investment attractiveness, which is the cost of factor inputs relative to a country’s competitiveness. This analysis reveals important insight into the economic trajectory of individual countries. Our framework also offers a novel methodology for the estimation of a theoretically grounded and empirically validated measure of national competitiveness.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18249.

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Date of creation: Jul 2012
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Handle: RePEc:nbr:nberwo:18249

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Cited by:
  1. Lechman, Ewa, 2014. "Changing patterns of export of goods versus macroeconomic competitiveness. A comparative analysis for East-Central European countries in the period 2000-2011," MPRA Paper 53639, University Library of Munich, Germany.
  2. Angela Cheptea & Lionel Fontagné & Soledad Zignago, 2012. "European Export Performance," Working Papers, CEPII research center 2012-19, CEPII research center.
  3. Angela Cheptea & Lionel Fontagné & Soledad Zignago, 2014. "European Export Performance," Post-Print, HAL hal-00975534, HAL.
  4. Hyytinen, Ari & Maliranta, Mika, 2013. "Firm lifecycles and evolution of industry productivity," Research Policy, Elsevier, Elsevier, vol. 42(5), pages 1080-1098.
  5. Karl Aiginger & Susanne Bärenthaler-Sieber & Johanna Vogel, 2013. "Competitiveness under New Perspectives," WWWforEurope Working Papers series, WWWforEurope 44, WWWforEurope.
  6. Bernard M. Hoekman, 2013. "Global Governance of International Competitiveness Spillovers," RSCAS Working Papers, European University Institute 2013/33, European University Institute.
  7. Foders, Federico & Vogelsang, Manuel Molina, 2014. "Why is Germany's manufacturing industry so competitive?," Kiel Policy Brief, Kiel Institute for the World Economy (IfW) 69, Kiel Institute for the World Economy (IfW).

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