International Competitiveness Flashcards
What are the measures of competitiveness? (2)
- Relative export prices
2. Relative unit labour costs
What is relative export prices?
Relative cost of uk exports to other countries
What is relative unit labour?
Employing workers to produce one unit labour cost. If wages increases but labour productivity decreases, unit labour cost increases.
Factors influencing international competitiveness? (5)
- Labour productivity
- Relative inflation rates
- Levels of infrastructure
4 . Cost of business - Exchange rates
How does labour productivity influence international competitiveness?
If German productivity rises faster than the UK they are more competitive
What affects labour productivity? (4)
- Levels of education and training
- Mobility of labour
- Motivation of workers
- Technology
How do relative inflation rates influence the international competitiveness?
If the uk inflation drops it makes us more competitive
How to levels of infrastructure influence the international competitiveness?
Troubles with transport– and increase in costs and decrease in competitiveness
How do the cost of the business influence the international competitiveness?
Regulation and taxes— if they increase then competitiveness drops
How to exchange rates influence international competitiveness?
An undervalued exchange rate will male exports competitive
Measures to increase competitiveness? (6)
- Education and training
- Investment and infrastructure
- Privatisation and deregulation
4 . Devaluation in exchange rates - Limiting wage growth
- Flexible labour markets
How does education and training increase competitiveness? And decrease
An increase in labour productivity
However – takes years
How does investment in infrastructure increase competitiveness? And decrease
Transport costs drop and an increase in productivity
However– expensive and takes time
How does privatisation and deregulation increase competition?
If efficiency increases from incentives of competition and private sector
How does a devaluation in the exchange rates increase competition? And decrease?
Increase in competition and exports cheap
— however leads to inflation and misses key issues
How does limiting wage growth increase competitiveness? And decrease
Increases productivity
– however difficult for government
How does a flexible labour market increase competitiveness? And decrease?
Drops labour costs and encourages firms to invest and grow
— however can lead to limited regulation
Benefits of being internationally competitive? (5)
- Rising exports
- Improved current account
- Low inflation
- Higher living standard- afford more imported goods
- Lower unemployment
Problems of being internationally competitive and how ? (2)
- Appreciation could damage growth– competitiveness causes a rise in exchange rates and makes exports less competitive
- Economy may become too reliant on exports– if economy becomes reliant on cheap exports it will be more vulnerable to a downturn in the global economy
