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Competitiveness: From a Dangerous Obsession to a Welfare Creating Ability with Positive Externalities

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  • Karl Aiginger

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Abstract

The attempt to define the term “competitiveness of nations” has reached the phase of decreasing returns. Fortunately, the literature seems to be converging slightly, a tendency, we hope to accelerate. We propose (1) defining competitiveness as “the ability of a country or location to create welfare.” We maintain (2) that a comprehensive evaluation contains an output evaluation and a process evaluation. We claim (3) that the output evaluation (competitiveness achieved) is closely related to a welfare assessment, with a specific slant and stepwise operationalisations. Furthermore, (4) process evaluation (investigating the ability) is related to the analysis of production and technology functions, adding qualitative elements like strategies, and the strengths and weaknesses of a country. This consensus is at variance with the concept of price competitiveness; it sidelines the importance of external balances, while the productivity approach to competitiveness is nested within. Dangerous obsessions and wrong policy conclusions can never be excluded, but are much less likely if we use this approach to competitiveness—as compared to concepts focusing on price competitiveness or on external balances. Specifically, the greater competitiveness of one country must not necessarily go hand in hand with lower competitiveness in other countries. In advanced countries specifically, policies promoting the ability to create welfare will create positive spillovers into other economies. Copyright Springer Science + Business Media, LLC 2006

Suggested Citation

  • Karl Aiginger, 2006. "Competitiveness: From a Dangerous Obsession to a Welfare Creating Ability with Positive Externalities," Journal of Industry, Competition and Trade, Springer, vol. 6(2), pages 161-177, June.
  • Handle: RePEc:kap:jincot:v:6:y:2006:i:2:p:161-177
    DOI: 10.1007/s10842-006-9475-6
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    References listed on IDEAS

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    1. Isabel Grilo & Gert Koopman, 2006. "Productivity and Microeconomic Reforms: Strengthening EU Competitiveness," Journal of Industry, Competition and Trade, Springer, vol. 6(2), pages 67-84, June.
    2. Karl Aiginger & Michael Landesmann, 2002. "Competitive Economic Performance: The European View," WIFO Working Papers 179, WIFO.
    3. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    4. Fagerberg, Jan, 1994. "Technology and International Differences in Growth Rates," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1147-1175, September.
    5. Aiginger, Karl, 1997. "The Use of Unit Values to Discriminate between Price and Quality Competition," Cambridge Journal of Economics, Oxford University Press, vol. 21(5), pages 571-592, September.
    6. Fagerberg, Jan, 1988. "International Competitiveness," Economic Journal, Royal Economic Society, vol. 98(391), pages 355-374, June.
    7. Oughton, Christine & Whittam, Geoff, 1997. "Competition and Cooperation in the Small Firm Sector," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(1), pages 1-30, February.
    8. Karl Aiginger, 2006. "Revisiting an Evasive Concept: Introduction to the Special Issue on Competitiveness," Journal of Industry, Competition and Trade, Springer, vol. 6(2), pages 63-66, June.
    9. von Tunzelmann, G. N., 1995. "Government policy and the long-run dynamics of competitiveness," Structural Change and Economic Dynamics, Elsevier, vol. 6(1), pages 1-21, March.
    10. Aiginger, K., 1998. "A framework for evaluating the dynamic competitiveness of countries," Structural Change and Economic Dynamics, Elsevier, vol. 9(2), pages 159-188, June.
    11. Eckhard Siggel, 2006. "International Competitiveness and Comparative Advantage: A Survey and a Proposal for Measurement," Journal of Industry, Competition and Trade, Springer, vol. 6(2), pages 137-159, June.
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    More about this item

    Keywords

    competitiveness; welfare evaluation; innovation; Lisbon strategy; F10; F15; F43; O31; O40; O57;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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