International Competitiveness Flashcards
Relative unit labour costs
cost of labour needed to generate output, to compare unit labour costs they must be converted to the same currency or to an index number
Relative productivity
Higher productivity means greater competitiveness as output per worker will increase
relative export prices
If currency falls exports are cheaper and more competitive, cost of labour falling also affects this especially in labour intensive areas
Non price factors that can judge competitiveness
- quality
- design
- reliability
- availability
factors influencing international competitiveness
- Real exchange rates and Relative inflation rates
- Productivity which relies on the human capital level
- wage costs
- non wage costs like environmental protection or pensions or health and safety
- More regulations increase costs
- Research and development helps innovate production and products to increase competitiveness
- Flexible labour market so can adjust to changes quicker
human capital level
economic skill and value of a worker which is affected by education, training and technology
Government supply side policies focused on improving competitiveness
- Improve education and training
- Improve labour market flexibility by weakening unions
- incentives for firms to invest profits like tax breaks
- improve infrastructure
- deregulation or removal of red tape or privatisation to create more efficiency
- encourage immigration to increase size or skill of the labour force
Benefits of international competitiveness
- Increased growth and employment
- help to improve BoP
- Important for countries that rely on international trade
problems with being internationally competitive
- Can create large surplus on the current account which may show a low confidence and spending economy
- over reliance on export led trade can be vulnerable to shocks worldwide
- flexible labour market can create lack of job security
- Indicates lack of environmental concern
