4.1.9 International competitiveness Flashcards
What are the two measures of international competitveness?
Relative unit labour costs - wages / total output or the cost of employing workers for each unit of good.
Relative export prices - Price of UK exports compared to the exports of the UK’s main trading partners. A rise in relative export prices means UK export prices have risen more than other countries and so have become less competitive.
What are the benefits of being competitive?
A country will experience a CA surplus. This surplus allows them the oppurtunity to invest overseas and build a surplus of assets overseas.
They are likely to attract FDI as they probably have low labour costs -> transfer of knowledge, skills and technology.
Employment will increase and a rise in labour
There will be economic growth both by supply side improvements and demand side improvements relating to X - M.
What are the problems with being competitive?
It can be easily lost.
A CA Surplus may = rise in exchange rate = reduced competitiveness.
Can become dependent on overseas countries.
