Dimensions of Competitiveness

Dimensions of Competitiveness

Edited by Paul De Grauwe
Copyright Date: 2010
Published by: MIT Press
Pages: 312
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  • Book Info
    Dimensions of Competitiveness
    Book Description:

    Competitiveness among nations is often approached as if it were a sports competition: some countries win medals, others lose out. This view of countries fighting it out in the economic arena is especially popular in business circles and among politicians. Economists, however, take a very different approach to international economic relations, arguing that international trade leads not to winners and losers but to win-win situations in which all countries profit. In this volume, leading economists take on the sometimes-derided concept of competitiveness, demonstrating the value of systematic analysis in an area too often dominated by special interest groups who use (and abuse) the concept to advance hidden agendas. The chapters range from broad theoretical views to case studies, examining the multiple factors that drive competitiveness. Contributors consider the conceptual framework underlying the World Economic Forum's approach to competitiveness; differences in per capita GDP between the United States and the European Union; an integrated approach to measuring competitiveness and comparative advantage; divergent trends in price and cost competitiveness in the euro area; methodological issues in constructing competitiveness indicators; taxation and international competitiveness; and a case study of Mexico's competitiveness in world markets in comparison to China's. Contributors Harry P. Bowen, Michele Ca' Zorzi, Jean-Philippe Cotis, Romain Duval, Christoph Fischer, Michael S. Knoll, Inmaculada Martinez-Zarzoso, Wim Moesen, Felicitas Nowak-Lehmann, Xavier Sala-i-Martin, Bernd Schnatz, Alain de Serres, Eckhard Siggel, Sebastian Vollmer

    eISBN: 978-0-262-28932-0
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Series Foreword
    (pp. vii-viii)

    This book is part of the CESifo Seminar Series. The series aims to cover topical policy issues in economics from a largely European perspective. The books in this series are the products of the papers and intensive debates that took place during the seminars hosted by CESifo, an international research network of renowned economists organized jointly by the Center for Economic Studies at Ludwig-Maximilians-Universität, Munich, and the Ifo Institute for Economic Research. All publications in this series have been carefully selected and refereed by members of the CESifo research network....

  4. Introduction
    (pp. ix-xvi)
    Paul De Grauwe

    The concept of competitiveness elicits discomfort if not rejection among many economists. The main reason is that the concept is often associated with a tournament in which countries are ranked. Such a ranking suggests that there are winners and losers. Thus competitiveness is seen as being similar to a sports competition like the Olympics. Countries fight in the economic arena. Some are winning medals; others gain nothing or even lose out in the international competitiveness struggle. This view of competitiveness is especially popular in business circles. Countless business books identify the factors that will keep firms competitive in a fierce...

  5. 1 The Economics behind the World Economic Forum’s Global Competitiveness Index
    (pp. 1-18)
    Xavier Sala-i-Martin

    Competitivenessis defined as the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the sustainablelevelof prosperity that can be earned by an economy. In other words, more competitive economies tend to be able to produce higher levels of income for their citizens. The productivity level also determines the rates of return obtained by investments in an economy. Given that the rates of return are the fundamental determinants of the aggregate growth rates of the economy, a more competitive economy is one that is likely...

  6. 2 Competitiveness, Economic Performance, and Structural Polices: An OECD Perspective
    (pp. 19-94)
    Jean-Philippe Cotis, Alain de Serres and Romain Duval

    The world is obsessed with competitiveness. Conferences are held to discuss competitiveness. Politicians emphasise competitiveness. Major policy initiatives, such as the Lisbon Agenda in Europe, are launched with reference to competitiveness. Yet, the focus on competitiveness makes little sense for a discussion of economic policies. At face value, the notion of competitiveness as a policy objective has a mercantilist flavor. It is suggestive of a zero-sum game whereas, in fact, one country’s economic success rarely hampers, and frequently benefits, that of other countries. A focus on competitiveness may thus lead to counterproductive policy reactions. It is easy to imagine an...

  7. 3 Concepts and Measurements of Competitiveness: Toward an Integrated Approach
    (pp. 95-120)
    Eckhard Siggel

    While the concept of comparative advantage is well established and clearly defined in the economic literature, this is not the case of competitiveness. A wide variety of definitions exists, ranging from micro to macroeconomic ones, from positive to normative and from static to dynamic concepts; and there are more than these criteria and dimensions. As to the measurement of these concepts the variety is similarly large, although some of the proposed concepts have not been defined sufficiently to be measurable. The measurement of comparative advantage has also remained somewhat ambiguous, due to the fact that its clearest definition, the one...

  8. 4 Explaining and Forecasting Euro Area Exports: Which Competitiveness Indicator Performs Best?
    (pp. 121-148)
    Michele Ca’ Zorzi and Bernd Schnatz

    The objective of this chapter is to assess empirically whether among the cost and price-competitiveness indicators at our disposal, it is possible to single out one that outperforms the other in explaining and predicting extra-euro area export volumes. To this end we examine five measures of real effective exchange rates (REER) plus one based on relative export prices (RXP), reviewing their usefulness as plausible measures of competitiveness for the euro area. After concluding that, from a methodological standpoint, none of them can a priori be defined as “superior” or “inferior,” we assess their relative empirical performance.

    In particular, two key...

  9. 5 An Assessment of the Trends in International Price Competitiveness among EMU Countries
    (pp. 149-180)
    Christoph Fischer

    Economic policy makers rarely pay much attention to inflation differentials between regions that share a common currency. The European Monetary Union (EMU), however, represents a notable exception to this general observation. The annual inflation rates of many EMU member countries, measured by the harmonized index of consumer prices (HICP), have deviated by more than half a percentage point annually from the EMU average in most years since the introduction of the euro in 1999. In some cases, the differential to the average exceeded two percentage points (see ECB 2005b). At first sight, inflation differentials of this magnitude may not appear...

  10. 6 Benchmarking the Competitiveness of Nations: Benevolence versus Equal Treatment?
    (pp. 181-206)
    Harry P. Bowen and Wim Moesen

    Each year organizations such as the World Economic Forum (WEF) and the Institute for Management Development (IMD) publish rankings of national competitiveness among countries. These rankings serve as benchmarks for national policy makers and interested parties to judge the relative success of their country in achieving the competitiveness criteria represented by the corresponding competitiveness index. One widely watched composite competitiveness index is the WEF’s Global Competitiveness Index (WEF 2006).¹ Conceptually, the Global Competitiveness Index (GCI) is meant to reveal the extent to which a country’s institutions, economic infrastructure, and policies and practices are supportive of the level and growth of...

  11. 7 Business Taxes and International Competitiveness: Understanding How Taxes Can Distort Capital Ownership and Designing a Nondistortive International Tax System
    (pp. 207-254)
    Michael S. Knoll

    Competitiveness has been called a dangerous obsession.¹ It is certainly an obsession.² Around the world, competitiveness considerations frequently inform policy and the law. One place where this obsession is evident is in the drafting of tax laws. Frequently, the claim is made that taxation is one—if not the leading source—of a lack of competitiveness. Because government officials find it hard to reject claims from their constituents that taxation places local businesses are at a competitive disadvantage relative to foreign firms, the tax laws are regularly amended with the goal of improving competitiveness. There is much evidence for that...

  12. 8 Competitiveness: A Comparison of China and Mexico
    (pp. 255-272)
    Felicitas Nowak-Lehmann, Sebastian Vollmer and Inmaculada Martínez-Zarzoso

    Latin American countries have lost competitiveness in world markets in comparison to China for the last two decades. The economic opening up of China, which was strategic and well planned, included the attraction of foreign companies and their know-how through special incentives such as tax exemptions, and through the creation of export-processing zones. Latin American countries, in contrast, tried to pursue unilateral and regional trade liberalization (e.g., creation of MERCOSUR, CAN, CACM). Their attempts to form free trade agreements (FTAs) with the European Union (EU) and the United States have not yet yielded results. Overall, Latin America’s strategic planning of...

  13. Contributors
    (pp. 273-274)
  14. Index
    (pp. 275-290)