International Competitiveness Flashcards
What is competitiveness?
Sustained ability to sell goods and services profitably
Price competitiveness
Differences in relative unit labour cost
Non-Price Competitiveness
Product quality, innovation, design, reliability, choice, branding, marketing
Non wage cost factors for competitiveness
Environmental taxes
Employment protection laws
Statutory requirements
Employment taxes
Relative unit labour costs
Labour costs per unit of output
Determination of unit labour costs
Average wages
Labour productivity
Unit labour costs rise when wages are rising faster than productivity
Relative unit labour costs rise when
Country’s exchange rate appreciated
Wage costs rise relatively faster
Labour productivity is relatively slower
How to lower relative unit labour costs
Monetary policy interventions
Wage controls
Supply side measures
Relative export prices
Country’s export prices in relation to other countries
Relative export prices rise when
Appreciation of currency
High relative inflation
Export businesses experience higher costs
Exporters are hit by import tariffs
Competitiveness rankings
Effectiveness of institutions
Quality of infrastructure
Macroeconomic performance
Health and education
Efficiency of goods and labour markets
Technological readiness
Sophistication of business
Innovation
Policies to improve competitiveness
Competitive exchange rate
Competitive tax environment
Investment in human capital
Increased R and D
Stronger market competition
Stable macroeconomic environment
Investment in critical infrastructure
Fiscal policy and international competitiveness
Subsidies lower research costs
Tax incentives encourage ideas
Lower employment taxes stimulate skilled migration
Lower capital gains tax encourages start ups
Special economic zones attract research intensive business
Long run competitiveness
Reliance on currency is not sustainable
Infrastructure and innovation are crucial
Micro foundations such as skills in the workforce
Benefits of international competitiveness
Improved living standards
Stronger trade performance
Economic growth
Employment creation
Higher government tax revenues
Problems of international competitiveness
Trade surpluses may create protectionism
Demand pull inflation and risks
Growing inequality
Increased competitiveness may cause exchange rate to appreciat
