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The Global Competitiveness Report: A Tool for Fostering Better Policies. 8 th November, 2005 Augusto Lopez-Claros Chief Economist & Director Global Competitiveness Programme World Economic Forum Geneva, Switzerland. Contents. Part I. Global Competitiveness Programme

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the global competitiveness report a tool for fostering better policies

The Global Competitiveness Report: A Tool for Fostering Better Policies

8th November, 2005

Augusto Lopez-ClarosChief Economist & Director

Global Competitiveness ProgrammeWorld Economic ForumGeneva, Switzerland

slide2

Contents

Part I. Global Competitiveness Programme

  • What do we mean by “competitiveness” ?

Part II. The Growth Competitiveness Index

  • Results and Analysis

Part III. Global Competitiveness Index

  • Macroeconomy and Public Institutions
  • Results and Analysis
slide3

Part I. Global Competitiveness Programme:

What do we mean by “competitiveness” ?

  • Competitiveness is defined as the set of factors, policies and institutions that determine the level of productivity of a country
  • A more competitive economy is one that is likely to grow faster over the medium to long run
  • We try to shed light on “the factors, policies and institutions” that determine the sharply different growth experiences of 117 economies worldwide
slide5

The Global Competitiveness Programme

  • Key insights gained from competitiveness programme
    • The factors that determine the level of productivity of a country are many and spread over a large number of areas
    • These factors matter differently for different countries depending on their stage of development
    • Their relative importance changes over time
slide6

Technology Index

Macroeconomic Environment Index

Public Institutions Index

Technology Transfer Sub-Index

Corruption Sub-Index

Country Credit

Rating

Government

Waste

Information & Communications Technology Subindex

Part II. The Growth Competitiveness Index

Growth Competitiveness Index

Macroeconomic

stability Sub-Index

Contracts and

law Sub-Index

Innovation Sub-Index

slide13

Part III. The Global Competitiveness Index

  • The Growth Competitiveness Index is a simple structure which captures some of the key drivers of growth.
  • It does not incorporate concepts which the theory or empirical observation suggests are important determinants of competitiveness.

For instance, the functioning of labour markets, the quality of a country’s infrastructure, the state of public health and the size of the market.

  • The Global Competitive Index tries to assess both the macroeconomic and microeconomic determinants of competitiveness in one index
slide14

The Global Competitiveness Index

Three stages of development:

  • “Factor-driven stage”Firms compete in prices, taking advantage of cheap factors

e.g., India, China, Ukraine

  • “Efficiency-driven stage”Efficient production practices to increase productivity

e.g., Poland, Brazil, Mexico

  • “Innovation-driven stage”Economies need to produce innovative products using sophisticated production methods

e.g., Finland, Germany, Japan

slide15

The Global Competitiveness Index

The Nine Pillars of Competitiveness

  • Institutions
  • Infrastructure
  • Macroeconomy
  • Health and Primary Education

Basic requirements

Key for factor-driven economies

  • Higher Education and Training
  • Market Efficiency (goods, labour, financial)
  • Technological Readiness

Efficiency enhancers

Key for efficiency-driven economies

Innovation and sophistication factors

  • Business Sophistication
  • Innovation

Key for innovation-driven economies

slide16

The Global Competitiveness Index

Weights given to the groups of pillars (subindexes)

slide17

The Global Competitiveness Index

List of countries in each stage

slide18

The Global Competitiveness Index

Top performers in the nine pillars

the global competitiveness index
Public Institutions

Property rights

Diversion of public funds

Public trust of politicians

Judicial independence

Favoritism in decision of government officials

Wastefulness of government spending

Burden of government regulation

Business costs of terrorism

Reliability of police services

Business costs of crime and violence

Organized crime

The Global Competitiveness Index

Macroeconomy

  • Government surplus/deficit
  • National savings rate
  • Inflation
  • Interest rate spread
  • Government debt / GDP ratio
  • Real effective exchange rate

Technology & Innovation

  • Country technological readiness
  • Capacity for innovation
  • Technology absorption by firms
  • FDI and technology transfer
  • Spending on R&D
  • Technology penetration (cell phones, Internet users, PCs)
  • Quality of scientific research institutions
  • Academic/Private sector research collaboration
  • Availability of scientists and engineers
  • Appropriate legal framework and intellectual property protection
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