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Competitiveness and its predecessors - a 500-year cross-national perspective

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An important problem facing the standard economic theory of today, is that the countries which grew rich did so in the wrong way. In the neo-classical world, additional created wealth is supposed to spread through lowered prices. In a world with perfect information and no economies of scale, there is no room for wealth to be taken out in any other way. New technology in the form of added capital per worker increases the output of the economy, and - under the standard assumptions - this spreads through the world economy in the form of lowered prices. Both Adam Smith (12, p. 269) and David Ricardo (13, pp. 46-47) explicitly state that this would be the effect of improved techniques - prices would fall. However, as technology progresses a nation can get rich in two very different ways. One is the mechanism suggested by Smith and Ricardo: technological change only causes prices to fall. The other way, which is not discussed outside the field of labour economics, is that an important portion of the benefits from technological change is being distributed inside the producing nations through higher profits, higher wages, and higher taxable income overall. I call the first mechanism The Classical Mode of distribution of economic growth, and the second The Collusive Mode of distribution. When the first mechanism operates the benefits of technical change are spread exclusively to the consumers of goods produced. When the second mechanism operates, the producer (company and nation) of goods retains an important part of the benefits of improved productivity. (See 14, for a discussion of this). Only when the second system is at work - when there is a collusive spread of economic growth - there is a possibility for discussing competitiveness. Competitiveness in this way can be seen as the consequences on a national level of what labour economists refer to as 'industry rent'. The core of the competitiveness strategy is to locate industries where high industry rents exists - where there is a collusive spread of economic growth in my terminology. Competitiveness - the income-rising effect - is essentially achieved through appropriation of this rent.

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Paper provided by The STEP Group, Studies in technology, innovation and economic policy in its series STEP Report series with number 199403.

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Handle: RePEc:stp:stepre:1994r03

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  1. Krugman, Paul R, 1993. "What Do Undergrads Need to Know about Trade?," American Economic Review, American Economic Association, vol. 83(2), pages 23-26, May.
  2. Keith Smith & Karl Führer & Espen Dietrichs & Errko Autio, . "Innovation Activities in Pulp, Paper and Paper Products in Europe," STEP Report series 199704, The STEP Group, Studies in technology, innovation and economic policy.
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Cited by:
  1. Lall, Sanjaya, 2001. "Competitiveness Indices and Developing Countries: An Economic Evaluation of the Global Competitiveness Report," World Development, Elsevier, vol. 29(9), pages 1501-1525, September.
  2. Mario Cimoli & Gabriel Porcile, 2011. "Technology, structural change and BOP constrained growth: a structuralist toolbox," Working Papers 0120, Universidade Federal do Paraná, Department of Economics.
  3. Erik S. Reinert & Vemund Riiser, . "Recent trends in economic theory - implications for development geography," STEP Report series 199412, The STEP Group, Studies in technology, innovation and economic policy.
  4. Sanjaya Lall, . "Comparing National Competitive Performance: An Economic Analysis of World Economic Forum's Competitiveness Index," QEH Working Papers qehwps61, Queen Elizabeth House, University of Oxford.
  5. Reinert, Erik S., 1994. "A Schumpeterian theory of underdevelopment – a contradiction in terms?," MPRA Paper 48157, University Library of Munich, Germany.
  6. Andrés Maroto-Sanchez, 2010. "Growth and productivity in the service sector: The state of the art," Working Papers 07/10, Instituto Universitario de Análisis Económico y Social.
  7. Christian Fischer & Sebastian Schornberg, 2007. "Assessing the competitiveness situation of EU food and drink manufacturing industries: An index-based approach," Agribusiness, John Wiley & Sons, Ltd., vol. 23(4), pages 473-495.
  8. Igor Pilipenko, 2005. "Clusters and Territorial-Industrial Complexes - Similar Approaches or Different Concepts? - first Evidence from Analysis of Development of Russian Regions," ERSA conference papers ersa05p70, European Regional Science Association.
  9. Cimoli, Mario & Fleitas, Sebastian & Porcile, Gabriel, 2011. "Real Exchange Rate and the Structure of Exports," MPRA Paper 37846, University Library of Munich, Germany.
  10. Nikolaos Kapitsinis & Theodore Metaxas, 2012. "Territorial Competition: Theories, arguments, policies and lessons of the last 25 years," ERSA conference papers ersa12p947, European Regional Science Association.
  11. Chris Freeman, 2003. "A Schumpeterian Renaissance?," SPRU Working Paper Series 102, SPRU - Science and Technology Policy Research, University of Sussex.
  12. KAPITSINIS, Nikolaos & METAXAS, Theodore & DUQUENNE, Marie Noelle, 2013. "Exploring The Coherence And The Meaning Of Territorial Competition: Do National States Behave In The Same Way As Firms In Case Of Default?. The Cases Of Greece And Dubai," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(2), pages 57-72.
  13. Ngai-Ling Sum & Bob Jessop, 2013. "Competitiveness, the Knowledge-Based Economy and Higher Education," Journal of the Knowledge Economy, Springer, vol. 4(1), pages 24-44, March.
  14. Sanjaya Lall, 2013. "Reinventing Industrial Strategy: The Role Of Government Policy In Building Industrial Competitiveness," Annals of Economics and Finance, Society for AEF, vol. 14(2), pages 785-829, November.
  15. Maroto-Sánchez, Andrés & Cuadrado-Roura, Juan R., 2009. "Is growth of services an obstacle to productivity growth? A comparative analysis," Structural Change and Economic Dynamics, Elsevier, vol. 20(4), pages 254-265, December.
  16. Roberto Cellino & Anna Soci, 2002. "Pop competitiveness," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 55(220), pages 71-101.
  17. Erik S. Reinert, 2006. "European Integration, Innovations and Uneven Economic Growth: Challenges and Problems of EU 2005," The Other Canon Foundation and Tallinn University of Technology Working Papers in Technology Governance and Economic Dynamics 05, TUT Ragnar Nurkse School of Innovation and Governance.
  18. Sanjaya Lall, . "Selective Industrial and Trade Policies in Developing Countries: Theoretical and Empirical Issues," QEH Working Papers qehwps48, Queen Elizabeth House, University of Oxford.
  19. Gabriel Porcile & Marcio Holland & Mario Cimoli & Luciana Rosas, 2006. "Especialización, tecnología y crecimiento en el modelo Ricardiano [Specialization, technology and growth in the Ricardian model]," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 16(3), pages 483-506, September.
  20. Roberto Cellino & Anna Soci, 2002. "Pop competitiveness," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 55(220), pages 71-101.

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