4.1.9- International competitiveness Flashcards
What is a CAcD likely to mean?
Low competitiveness
What are the measures of international competitiveness?
-relative unit labour costs
-relative export prices
How do you calculate relative unit labour costs?
Total wages / real output
What are the factors influencing international competitiveness?
-exchange rates
-productivity
-regulation
-investment
-taxation
-inflation
-economic stability
-flexibility
-competition and demand at home
-factors of production
-openness to trade
How does regulation impact international competitiveness?
-high levels slows down business decisions, making them les adaptable to changes in the global market
-increases costs
How does taxation impact competitiveness?
-reduces investment
-reduces incentives to take risks
How does economic stability impact competitiveness?
If not stable, there will be no long term investment
How does flexibility impact competitiveness?
-can move labour in response to changes in demand
-can adapt when demand changes
How does competition and demand at home impact competitiveness?
-good level of domestic demand means firms have economies of scale so low costs
-lots of competition means good quality and low costs
How do factors of production impact competitiveness?
Good quality FoP means you can produce more + better quality goods
How does openness to trade impact competitiveness?
-low trade barriers
What are the benefits of competitiveness?
-current account surpluses
-attracts FDI
-employment
-growth
What are the problems of competitiveness?
-can easily be lost
-more dependent on overseas
Why can competitiveness easily be lost?
Surpluses can lead to appreciation
