4.1.9 International Competitiveness Flashcards
What are some Measures of International Competitiveness?
Relative Unit Labor Costs:
Relative unit labor costs compare the cost of labor in one country to another.
It is calculated by dividing the average wage in one country by the productivity of labor in that country, then comparing it to the same ratio in another country.
A lower relative unit labor cost indicates greater competitiveness, as it suggests that a country can produce goods and services at a lower labor cost.
Relative Export Prices:
Relative export prices compare the prices of a country’s exports to those of its competitors.
It involves analyzing the price levels of similar products produced in different countries.
Lower relative export prices indicate greater competitiveness, as it means a country’s products are more attractively priced in international markets.
What are some Factors Influencing International Competitiveness?
- Cost factors:
Labor Costs: Lower labor costs can improve competitiveness.
Production Efficiency: Efficient production processes reduce costs.
Exchange Rates: Favorable exchange rates can make exports more competitive. - Quality and Innovation: High product quality and continuous innovation can enhance competitiveness. Investing in research and development (R&D) can lead to competitive advantages.
- Infrastructure and Logistics: Efficient transportation, communication, and infrastructure support competitiveness. Shortened supply chains can reduce costs and improve delivery times.
- Government Policies: Favorable trade policies, tax incentives, and regulations can boost competitiveness. Stable political environments and legal systems are crucial.
What are the Benefits of Being Internationally Competitive?
Increased Exports: Competitive countries can sell more goods and services abroad, boosting economic growth.
Job Creation: Export-oriented industries often create jobs, reducing unemployment.
Higher Standards of Living: International competitiveness can lead to higher incomes and improved living standards for citizens.
Foreign Direct Investment (FDI): Competitive environments attract foreign investment, leading to economic development.
What are the Problems of Being Internationally Uncompetitive?
Trade Deficits: Uncompetitive countries may import more than they export, leading to trade imbalances.
Economic Decline: A lack of competitiveness can result in declining industries and economic stagnation.
Unemployment: Uncompetitive industries may shed jobs, leading to high unemployment rates.
Income Inequality: A lack of competitiveness can exacerbate income inequality as some industries decline while others thrive.
