Académique Documents
Professionnel Documents
Culture Documents
Index 1
XAVIER SALA-I-MARTIN, Columbia University,
Universitat Pompeu Fabra, and NBER
ELSA V. ARTADI, Harvard University
CHAPTER 1.3
51
Technological progress (whether created by the country or copied from the leading economies) was then
thought to be a central determinant of economic growth.5
Few people today disagree with this idea, although this
merely shifts the question from what determines the
growth rate of GDP? to what determines the rate of
technological progress?This is why economists have kept
searching. Many answers have been proposed: openness,
macroeconomic stability, governance, the rule of law,
institutions, lack of corruption, market orientation, government waste, firm sophistication, demand conditions,
market size, and many others.
Each of these conjectures rests on solid theoretical
foundations and makes economic sense; some even have
strong empirical support.The central point, however, is
that they could all be true at the same time because they
are not mutually exclusive.The main lesson from two
centuries of economic thinking should be that the process
of economic development is rather complex and many
factors are needed for a country to succeed. As William
Easterly (2002) famously put it: there is no such a thing
as a Holy Grail of economic success.
We capture this complexity by assigning the many
factors that underlie competitiveness to 12 areas that we
call the 12 pillars of economic competitiveness.These pillars are:
First pillar: Institutions
The institutional environment forms the framework within which private individuals, firms, and governments interact to generate income and wealth. In 1776, Adam Smith
argued that wealth could not be created in a world where
property rights are not well defined and guaranteed. De
Soto (2000) also defends the importance of the system of
property rights. Owners of land, corporate shares, and
even intellectual property are unwilling to invest in the
improvement and upkeep of their property if their rights
as owners are insecure. Equally importantly, if property
cannot be bought and sold with the confidence that the
authorities will endorse the transaction, the market itself
will fail to generate dynamic growth.The absence of
property rights also drives people out of formal markets
into the informal sector. De Soto estimates that people
the developing and former communist countries hold
more than US$9 trillion in what he calls dead capital
property that is owned informally, but not legally, and is
thus incapable of forming the basis of robust economic
development. More recently, an important and voluminous
strand of empirical research confirms the importance of
public institutions as key determinants of the current level
of GDP per capita.6
The importance of institutions is not restricted to the
legal framework. Government attitudes toward markets
and freedoms and the efficiency of its operations are also
very important: excessive bureaucracy and red tape,7
53
54
The last pillar of competitiveness is technological innovation. One of the central tenets of neoclassical growth theory is that, in the long run, the only sustainable source of
economic prosperity is technological progress.16 Although
substantial gains can be obtained by improving institutions, building infrastructures, reducing macroeconomic
instability, or increasing the human capital of the population, all these factors seem to run into eventual diminishing returns.The same is true for the efficiency of the
labor, financial, or goods markets. In the long run, standards of living cannot be expanded without technological
innovation. Innovation is particularly important for
economies as they approach the frontiers of knowledge
and the possibility of copy and imitation tend to disappear.The environment that is most inductive to innovation includes modern universities and research institutions
that cooperate with businesses, a legal environment that
protects intellectual property rights, public institutions that
understand the importance of knowledge and act on this
understanding when they make purchasing decisions, and
the availability of scientists and engineers who can participate in the process of technological improvement.
Although we describe the 12 pillars of competitiveness separately, we do so only for expository purposes.
This should not obscure the fact that they are not independent: not only they are related to each other, but they
tend to reinforce each other. For example, innovation
(12th pillar) is not possible in a world without institutions
(1st pillar) that guarantee intellectual property rights, it
cannot be performed in countries with no human capital
(5th pillar), and will never take place in economies with
55
Finally, in the third stage, which we call innovationdriven stage, successful economies can no longer compete
in price or even quality because their own success has
increased prices (especially wages) so much that they can
no longer compete by producing the same goods. It is
time for these economies to produce different goods,
innovative products and practices using the most advanced
methods of production and organization. In this phase,
businesses need to increase their sophistication by organizing in clusters and by opting for advanced and superior
operations. Firms compete with unique strategies.
Institutions and incentives supporting innovation become
the central part of economic competitiveness.
Of course, each of the 12 pillars of competitiveness
outlined in the previous section matter for every one of
the stages of development. But different factors matter differently for countries in different stages. For example,
although the ability to innovate matters for all nations, it is
undoubtedly more important for advanced countries than
for economies in the early stages of development.We,
therefore, implement the idea of stages of development
by giving different weights to each of the 12 pillars in
each of the three stages.To this end, we group the pillars
that we think are more important in the factor-driven
stage into what we call basic requirements. Basic requirements include institutions (1st pillar), physical infrastructures (2nd pillar), basic human capital (first part of the 5th
pillar), macroeconomic stability (3rd pillar), and personal
security (4th pillar).
We group the pillars that are more important in the
efficiency-driven stage into what we call efficiency enhancers.
The efficiency enhancers include goods market efficiency
(6th pillar), labor market efficiency (7th pillar), financial
market efficiency (8th pillar), advanced human capital
(second part of the 5th pillar), technological readiness (9th
pillar), and openness/market size (10th pillar).
Finally, we group the pillars that are more important
in the innovation-driven stage into what we call innovation
and sophistication factors, which includes business sophistication and innovation, our 11th and 12th pillars respectively.
An important practical advantage of framing the
process of economic development in stages is that it helps
countries prioritize the areas in which they should focus
their attention. By giving more weight to some pillars than
to others, the analysis presented in this chapter can be used
as a tool for countries to pay attention to the pillars that are
more important for their stage of development. Countries
in stage 1 that score low in innovation or in business
sophistication should not worry too much. Countries in
stage 2 that are fast approaching stage 3, on the other hand,
should worry about not doing well in these areas.
The allocation of pillars to each of the three groups is
summarized in Figure 1.
Efficiency Enhancers
1.
2.
3.
4.
5a.
Institutions
Infrastructures
Macroeconomic Stability
Personal Security
Basic Human Capital
5b.
6.
7.
8.
9.
10.
Basic Requirements
Innovation and
Sophistication Factors
1 x basic requirements
+ 2 x efficiency enhancers
+ 3 x innovation factors
(Eq 1)
where 1, 2, and 3 are the weights that each subindex
gets in the overall index.21
The idea behind the concept of stages of development is that all components matter in all stages, but some
matter more than others in different stages. In other
words, the weights (the s) that each subindex gets in the
overall GCI depend on the stage of a particular country.
The exact weights of each of the three groups are displayed in Table 1. In the factor-driven stage, the basic
requirements have 50 percent, the efficiency enhancers
have a weight of 40 percent, and the innovation and
sophistication factors have small weight of 10 percent.
Factor-Driven Stage
Efficiency-Driven Stage
Innovation-Driven Stage
Basic
Requirements
Efficiency
Enhancers
Innovation and
Sophistication
Factors
50 percent
40 percent
30 percent
40 percent
50 percent
40 percent
10 percent
10 percent
30 percent
57
Principle 3. Transitions
The third principle on which the new GCI index is
founded is that, as economies develop, they move from
one stage to the next in a smooth fashion rather than in
abrupt jumps.23 Thus, the weights of each of the subindexes (the s in equation 1), change smoothly as a country
develops.This means that we have five groups of countries:
the three groups that belong to the three stages described
above, plus the countries that are moving from stage 1 to
stage 2 plus those that are moving from stage 2 to 3.
In practice, the allocation of countries to each group
is done as follows:
1.
2.
3.
4.
5.
58
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
Stage 1
Transition from 1 to 2
Stage 2
Transition from 2 to 3
Stage 3
Income between
US$2,000 and $3,000
Income between
US$9,000 and $17,000
Income of more
than US$17,000
Algeria**
Angola*
Bahrain**
Bangladesh
Bolivia
Bosnia and Hercegovina
Chad*
China
Colombia
Dominican Republic
Egypt
Ethiopia
Gambia
Georgia
Ghana
Guatemala
Honduras
India
Indonesia
Jordan
Kenya
Madagascar
Malawi
Mali*
Morocco
Mozambique
Namibia
Nicaragua
Nigeria*
Pakistan
Paraguay
Philippines
Serbia and Montenegro
Sri Lanka
Tanzania
Uganda
Ukraine
Venezuela**
Vietnam
Zambia
Zimbabwe
Brazil
Bulgaria
Ecuador
El Salvador
Jamaica
Macedonia
Peru
Romania
Thailand
Tunisia
Argentina
Botswana
Chile
Costa Rica
Croatia
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Malaysia
Mauritius
Mexico
Panama
Poland
Russian Federation
Slovak Republic
South Africa
Trinidad and Tobago
Turkey
Uruguay
Cyprus
Greece
Israel
Korea
Malta
Portugal
Slovenia
Taiwan
Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Hong Kong SAR
Iceland
Ireland
Italy
Japan
Luxembourg
Netherlands
New Zealand
Norway
Singapore
Spain
Sweden
Switzerland
United Arab Emirates
United Kingdom
United States
59
50%
40%
30%
Stage 1
Transition
from 1 to 2
$2,000
Transition
from 2 to 3
Stage 2
$3,000
$9,000
Stage 3
$17,000
60
50%
40%
30%
Stage 1
Transition
from 1 to 2
$2,000
$3,000
Transition
from 2 to 3
Stage 2
$9,000
Stage 3
$17,000
30%
20%
10%
Stage 1
Transition
from 1 to 2
$2,000
Transition
from 2 to 3
Stage 2
$3,000
$9,000
Stage 3
$17,000
61
Results
Table 3 displays the results of computing the Global
Competitiveness Index for 2004.The countries are ranked
in decreasing order.The second column contains the value
of the index and the third column the rank number.The
following six columns contain the information (value and
rank) for each of the three subindexes: the basic requirements subindex, the efficiency enhancers subindex, and
the innovation factors subindex respectively.The next
three tables decompose the index into its 12 pillars.
The most competitive country in the world is the
United States, with an overall score of 5.21, followed by
Finland (5.04), and Denmark (4.95), Switzerland (4.93),
and Sweden (4.92), which conclude the top five.The
United States does not score particularly well in basic
requirements (rank 18: the main cause is its dismal macroeconomic stabilityrank 83and its not-so-great performance in securityrank 37), but it is the worlds leader
in both efficiency enhancers and innovation factors. Since
the United States is in the third stage of development (the
innovation stage), the weight of the basic requirements is
relatively minor, so the other two subindexes put this
country in the leading position. Finland leads the world in
basic requirements, but it only ranks 6th in efficiency
enhancers (it is interesting to notice its 18th place in labor
market efficiency) and 4th in innovation factors. Denmark
is 2nd, 5th, and 8th respectively.
The next five are Germany (4.86), Singapore (4.85),
Hong Kong (4.81), United Kingdom (4.80), and Japan
(4.79). Of particular interest is the extremely low score of
Germany in labor market efficiency (82nd in the world).
Sweden is ranked quite low in that same pillar (25th),
which is led by Hong Kong (1st) and Singapore (2nd).
At the other end of the spectrum, the least competitive
country in the world is Angola (2.55), closely followed
by Chad (2.64). Angola ranks 104th in basic requirements
and innovation factors and 103rd in efficiency enhancers.
Chads scores are 103rd and 104th respectively. The rest
of the bottom five are also African countries: Ethiopia
(102nd with 2.88), Zimbabwe (101st with 2.96), and
Mozambique (100th with 2.98).These countries score
dismally almost across the board in the pillars that are
most important for their level of development (the exception is the relatively good macroeconomic performance
experienced by Mozambiquerank 42nd in the world).
The next five countries at the bottom of the competitiveness rankings are not all African, and they include two
European countries: the former republics of Yugoslavia
Bosnia-Hercegovina (3.13) and Serbia-Montenegro (3.16),
two African countries Mali (3.13) and Tanzania (3.14), and
one Latin American, Bolivia (3.19).
Averaging out the value of the index by region (see
Figure 5), we see that the most competitive region in the
world is North America.The values of the second and
third regions (Western Europe and East Asia) are quite
close to each other.The fourth position is for the Middle
East and North Africa.The next three regions (Eastern
Europe, South and Central America, and South and
Central Asia respectively) are also quite close. Sub-Saharan
Africa closes the ranking in the last position.
5.0
4.8
4.6
4.4
Score
4.2
4.0
3.8
3.6
3.4
3.2
3.0
North
America
Western
Europe
East AsiaPacific
MENA*
Eastern Europe
Central and
South America
South-Central
Asia
Sub-Saharan
Africa
63
United States
Finland
Denmark
Switzerland
Sweden
Germany
Singapore
Hong Kong SAR
United Kingdom
Japan
Taiwan
Netherlands
Iceland
Norway
Canada
Australia
France
Austria
Belgium
New Zealand
Luxembourg
Israel
Malaysia
Estonia
Bahrain
Korea
Ireland
Jordan
Chile
Tunisia
United Arab Emirates
China
Thailand
Spain
Slovenia
South Africa
India
Czech Republic
Lithuania
Portugal
Slovak Republic
Malta
Namibia
Latvia
Morocco
Hungary
Egypt
Indonesia
Brazil
Mauritius
Greece
Cyprus
Costa Rica
Panama
El Salvador
Italy
Romania
Botswana
Dominican Republic
Mexico
Vietnam
Algeria
Trinidad and Tobago
Russian Federation
BASIC REQUIREMENTS
EFFICIENCY ENHANCERS
INNOVATION FACTORS
Score
Rank
Score
Rank
Score
Rank
Score
Rank
5.21
5.04
4.95
4.93
4.92
4.86
4.85
4.81
4.80
4.79
4.72
4.72
4.70
4.69
4.66
4.63
4.60
4.57
4.54
4.54
4.52
4.48
4.47
4.46
4.39
4.38
4.38
4.32
4.29
4.25
4.21
4.20
4.17
4.10
4.09
4.08
4.07
4.06
4.06
4.05
4.03
4.01
3.98
3.97
3.97
3.96
3.95
3.92
3.88
3.86
3.84
3.83
3.83
3.81
3.80
3.80
3.75
3.75
3.71
3.70
3.68
3.68
3.68
3.67
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
5.50
6.03
5.99
5.88
5.76
5.75
5.89
5.95
5.48
5.35
5.31
5.59
5.80
5.96
5.58
5.70
5.49
5.61
5.51
5.60
5.76
5.06
5.36
5.31
5.20
5.30
5.23
5.25
5.20
5.17
5.55
4.85
4.90
5.08
5.13
4.76
4.53
4.83
4.80
5.21
4.78
5.01
4.80
4.86
4.70
4.75
4.67
4.56
4.39
4.86
4.94
5.02
4.57
4.65
4.51
4.56
4.48
4.62
4.42
4.47
4.48
4.71
4.50
4.42
18
1
2
6
8
10
5
4
20
22
23
14
7
3
15
11
19
12
17
13
9
34
21
24
29
25
27
26
30
31
16
41
38
33
32
46
56
42
43
28
45
36
44
40
49
47
50
55
67
39
37
35
53
51
58
54
61
52
64
62
60
48
59
65
5.02
4.54
4.55
4.45
4.45
4.27
4.60
4.65
4.61
4.26
4.38
4.36
4.42
4.25
4.30
4.28
4.15
4.13
4.12
4.25
4.16
4.18
3.91
4.03
3.71
3.87
4.11
3.49
3.76
3.55
3.81
3.59
3.57
3.79
3.63
3.63
3.60
3.60
3.61
3.64
3.61
3.52
3.24
3.47
3.27
3.51
3.23
3.28
3.51
3.24
3.47
3.53
3.36
3.32
3.21
3.48
3.19
3.25
3.07
3.21
2.95
2.70
3.16
3.18
1
6
5
8
7
14
4
2
3
15
10
11
9
16
12
13
20
21
22
17
19
18
25
24
30
26
23
45
29
40
27
38
39
28
32
33
37
36
34
31
35
42
56
47
53
44
57
52
43
55
48
41
49
51
59
46
60
54
69
58
79
92
62
61
5.18
4.70
4.42
4.61
4.69
4.74
4.15
3.90
4.38
4.94
4.44
4.32
3.97
4.01
4.23
4.04
4.30
4.11
4.14
3.87
3.75
4.28
3.69
3.26
3.01
3.87
3.88
3.04
3.27
3.32
3.40
3.43
3.31
3.53
3.41
3.60
3.69
3.35
3.30
3.20
3.16
2.78
2.83
2.93
3.14
3.08
3.18
3.27
3.55
2.98
3.13
2.93
3.18
2.89
2.69
3.48
2.88
2.79
2.70
3.02
2.63
2.50
2.96
3.14
1
4
8
6
5
3
14
20
9
2
7
10
19
18
13
17
11
16
15
23
24
12
26
40
55
22
21
51
38
35
33
31
36
29
32
27
25
34
37
41
44
74
68
63
45
48
43
39
28
59
47
62
42
64
80
30
65
73
79
54
87
91
60
46
(contd)
Jamaica
Sri Lanka
Turkey
Ghana
Colombia
Bulgaria
Uruguay
Poland
Ukraine
Philippines
Argentina
Peru
Nigeria
Uganda
Croatia
Venezuela
Gambia
Macedonia, FYR
Guatemala
Kenya
Madagascar
Georgia
Pakistan
Ecuador
Honduras
Paraguay
Zambia
Nicaragua
Malawi
Bangladesh
Bolivia
Serbia and Montenegro
Tanzania
Bosnia and Hercegovina
Mali
Mozambique
Zimbabwe
Ethiopia
Chad
Angola
BASIC REQUIREMENTS
EFFICIENCY ENHANCERS
INNOVATION FACTORS
Score
Rank
Score
Rank
Score
Rank
Score
Rank
3.66
3.65
3.62
3.62
3.61
3.60
3.57
3.57
3.55
3.55
3.54
3.53
3.53
3.50
3.46
3.45
3.45
3.40
3.37
3.37
3.36
3.35
3.35
3.34
3.29
3.26
3.25
3.24
3.22
3.20
3.19
3.16
3.14
3.13
3.13
2.98
2.96
2.88
2.64
2.55
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
4.23
4.31
4.41
4.18
4.15
4.24
4.52
4.25
4.18
4.03
4.44
4.19
4.08
4.02
4.21
4.16
3.94
4.08
4.02
3.72
3.97
3.94
3.78
4.18
4.13
3.99
3.61
3.98
3.70
3.81
3.90
3.55
3.47
3.66
3.60
3.53
3.41
3.42
3.09
2.92
71
68
66
75
78
70
57
69
74
82
63
73
80
83
72
77
89
81
84
93
87
88
92
76
79
85
96
86
94
91
90
98
100
95
97
99
102
101
103
104
3.33
3.03
3.10
3.11
3.10
3.08
2.98
3.13
2.90
3.11
2.96
3.00
2.97
3.01
3.00
2.77
3.01
2.83
2.75
3.01
2.76
2.85
2.91
2.55
2.49
2.60
2.93
2.58
2.80
2.63
2.55
2.80
2.84
2.67
2.70
2.48
2.48
2.35
2.23
2.26
50
70
66
65
67
68
76
63
82
64
78
74
77
73
75
88
72
85
90
71
89
83
81
98
99
95
80
96
87
94
97
86
84
93
91
101
100
102
104
103
3.00
2.81
3.08
2.82
3.00
2.68
2.66
2.99
3.03
2.84
2.81
2.64
3.07
2.87
2.80
2.64
2.77
2.57
2.60
3.03
2.71
2.36
2.94
2.44
2.30
2.25
2.76
2.16
2.57
2.41
2.18
2.64
2.73
2.35
2.48
2.26
2.65
2.23
2.04
1.88
56
71
49
69
57
81
82
58
53
67
70
85
50
66
72
86
75
89
88
52
78
95
61
93
97
99
76
102
90
94
101
84
77
96
92
98
83
100
103
104
65
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
United States
Finland
Denmark
Switzerland
Sweden
Germany
Singapore
Hong Kong SAR
United Kingdom
Japan
Taiwan
Netherlands
Iceland
Norway
Canada
Australia
France
Austria
Belgium
New Zealand
Luxembourg
Israel
Malaysia
Estonia
Bahrain
Korea
Ireland
Jordan
Chile
Tunisia
United Arab Emirates
China
Thailand
Spain
Slovenia
South Africa
India
Czech Republic
Lithuania
Portugal
Slovak Republic
Malta
Namibia
Latvia
Morocco
Hungary
Egypt
Indonesia
Brazil
Mauritius
Greece
Cyprus
Costa Rica
Panama
El Salvador
Italy
Romania
Botswana
Dominican Republic
Mexico
Vietnam
Algeria
Trinidad and Tobago
Russian Federation
1. Institutions
2. Physical
infrastructures
Score
Rank
Score
Rank
Score
Rank
Score
Rank
Score
Rank
5.22
5.50
5.37
5.16
5.13
5.15
5.53
5.18
5.43
4.73
4.65
5.18
5.45
5.13
5.05
5.26
4.60
4.99
4.62
5.31
4.98
4.53
4.74
4.50
4.60
3.87
4.78
4.48
4.53
4.61
4.69
3.91
4.01
4.10
3.97
4.59
3.92
3.44
3.89
4.16
3.75
4.24
4.46
3.57
4.08
3.80
3.97
3.87
3.80
3.80
3.94
4.19
3.96
3.51
3.90
3.38
3.24
4.15
3.13
3.50
3.67
3.50
3.62
2.99
8
2
5
11
13
12
1
9
4
20
22
10
3
14
15
7
26
16
23
6
17
28
19
30
25
50
18
31
29
24
21
47
41
39
43
27
46
72
49
36
56
33
32
65
40
54
42
51
55
53
45
35
44
68
48
77
80
38
84
69
61
70
64
93
6.12
6.28
6.61
6.43
6.16
6.44
6.34
6.48
5.45
6.12
5.36
6.02
5.77
5.85
5.87
5.83
6.37
5.72
6.09
4.96
5.85
4.87
5.30
4.74
4.76
5.19
4.11
4.33
4.62
4.34
5.52
3.49
4.30
4.80
4.55
4.87
3.35
4.66
4.17
4.68
3.86
3.86
5.04
4.02
3.74
3.75
3.84
3.93
3.53
4.17
4.33
4.78
3.14
3.94
3.86
3.87
3.31
3.81
3.15
3.39
2.45
3.20
3.60
3.59
9
7
1
4
8
3
6
2
20
10
21
12
17
15
13
16
5
18
11
25
14
26
22
31
30
23
42
37
34
36
19
60
39
28
35
27
63
33
40
32
48
47
24
43
53
52
50
45
58
41
38
29
70
44
49
46
64
51
69
62
91
67
55
56
4.79
5.71
5.55
5.52
5.43
5.02
5.79
5.75
5.10
4.60
5.47
5.31
5.19
6.41
5.41
5.49
5.04
5.32
5.22
5.53
5.81
4.64
5.53
5.77
5.22
6.06
5.54
5.43
5.59
5.29
5.53
6.06
5.74
5.48
5.49
5.21
4.68
5.14
5.29
5.14
5.24
4.83
5.25
5.64
5.04
4.97
4.81
5.08
4.32
5.36
4.95
4.85
4.84
5.09
4.96
4.86
5.15
5.67
5.10
5.31
5.48
6.31
5.58
5.72
83
12
17
22
31
65
6
9
54
90
29
35
47
1
32
23
62
34
44
21
5
89
19
7
43
4
18
30
15
37
20
3
10
27
24
45
87
51
38
52
41
77
40
14
60
68
81
58
96
33
70
75
76
57
69
74
50
13
56
36
26
2
16
11
4.44
5.74
5.52
5.34
5.13
5.19
5.29
5.38
4.56
4.33
4.54
4.49
5.64
5.47
4.61
4.95
4.51
5.08
4.66
5.23
5.23
4.32
4.59
4.73
4.63
4.54
4.84
5.22
4.39
4.85
5.27
4.14
4.15
4.08
4.71
3.41
4.33
4.00
3.87
5.19
4.19
5.20
3.77
4.31
4.48
4.38
4.10
3.49
3.65
4.19
4.65
4.58
4.04
3.91
3.11
3.74
4.07
4.38
4.11
3.40
4.20
3.90
2.94
3.14
37
1
3
6
15
13
7
5
30
42
31
34
2
4
26
17
33
16
23
9
10
44
27
20
25
32
19
11
39
18
8
53
52
56
22
82
43
59
65
14
49
12
69
45
35
40
55
80
75
48
24
29
58
62
92
70
57
40
54
83
47
63
96
90
6.91
6.94
6.92
6.97
6.98
6.94
6.49
6.93
6.86
6.99
6.52
6.94
6.97
6.95
6.96
6.96
6.96
6.95
6.94
6.94
6.94
6.95
6.63
6.80
6.81
6.86
6.92
6.76
6.88
6.76
6.74
6.64
6.28
6.95
6.91
5.73
6.35
6.90
6.80
6.90
6.86
6.94
5.50
6.75
6.16
6.83
6.62
6.42
6.64
6.78
6.85
6.68
6.90
6.80
6.70
6.96
6.62
5.06
6.60
6.77
6.58
6.62
6.75
6.64
23
18
21
4
2
13
74
20
31
1
72
15
3
9
6
5
8
10
16
17
14
11
62
41
36
29
22
47
28
46
50
60
80
12
24
86
79
26
37
25
30
19
88
49
81
35
65
75
61
44
33
55
27
40
54
7
64
90
68
45
70
63
48
59
3. Macro stability
5. Basic
human capital
4. Security
(contd)
Country
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
Jamaica
Sri Lanka
Turkey
Ghana
Colombia
Bulgaria
Uruguay
Poland
Ukraine
Philippines
Argentina
Peru
Nigeria
Uganda
Croatia
Venezuela
Gambia
Macedonia, FYR
Guatemala
Kenya
Madagascar
Georgia
Pakistan
Ecuador
Honduras
Paraguay
Zambia
Nicaragua
Malawi
Bangladesh
Bolivia
Serbia and Montenegro
Tanzania
Bosnia and Hercegovina
Mali
Mozambique
Zimbabwe
Ethiopia
Chad
Angola
1. Institutions
2. Physical
infrastructures
Score
Rank
Score
Rank
Score
Rank
Score
Rank
Score
Rank
3.72
3.70
3.48
4.20
3.54
3.07
3.74
3.17
2.75
3.39
3.15
3.23
3.32
3.56
3.10
2.89
4.15
3.04
3.03
3.64
3.25
3.03
2.96
2.91
3.01
2.69
3.67
3.08
3.84
2.80
2.74
3.07
3.44
2.95
3.68
2.95
3.39
3.42
2.69
2.47
58
59
71
34
67
88
57
82
100
75
83
81
78
66
85
98
37
89
90
63
79
91
94
97
92
103
62
86
52
99
101
87
73
96
60
95
76
74
102
104
3.55
2.79
3.21
2.88
3.06
3.18
3.63
3.07
3.48
2.55
3.52
2.72
2.35
2.47
3.30
3.08
2.90
2.83
2.64
2.42
2.33
2.47
2.81
2.60
2.83
2.23
2.68
2.19
2.55
2.31
2.17
2.46
2.63
2.18
2.16
2.14
2.80
2.22
1.36
1.73
57
80
66
75
73
68
54
72
61
87
59
81
93
88
65
71
74
77
83
92
94
89
78
85
76
96
82
98
86
95
100
90
84
99
101
102
79
97
104
103
4.35
4.66
4.54
4.75
4.98
5.18
3.95
5.07
5.49
5.04
5.26
5.10
5.76
4.82
4.90
5.02
3.70
5.10
5.16
4.74
4.53
4.57
5.03
5.47
5.01
4.83
4.72
4.07
3.38
5.20
4.54
4.07
4.82
4.80
4.87
5.23
2.45
4.23
4.91
3.52
95
88
92
84
67
48
100
59
25
61
39
55
8
79
72
64
101
53
49
85
94
91
63
28
66
78
86
99
103
46
93
98
80
82
73
42
104
97
71
102
2.72
3.66
4.18
4.73
2.43
3.00
4.43
3.07
3.28
2.67
3.50
3.34
3.32
3.42
3.82
3.02
4.45
2.69
2.70
2.56
3.71
3.29
3.78
3.30
3.21
3.53
4.16
3.90
3.92
2.37
3.70
3.93
3.70
3.57
4.58
3.14
3.87
4.28
2.93
3.55
98
74
50
21
103
95
38
93
88
101
79
84
85
81
67
94
36
100
99
102
71
87
68
86
89
78
51
64
61
104
72
60
73
76
28
91
66
46
97
77
6.79
6.73
6.66
4.32
6.73
6.79
6.85
6.86
5.92
6.51
6.80
6.59
5.65
5.83
5.94
6.80
4.48
6.71
6.56
5.23
6.04
6.36
4.31
6.60
6.61
6.68
2.80
6.66
4.79
6.35
6.37
4.19
2.78
4.80
2.72
4.20
4.53
2.96
3.58
3.35
43
51
57
95
52
42
34
32
84
73
38
69
87
85
83
39
94
53
71
89
82
77
96
67
66
56
102
58
92
78
76
98
103
91
104
97
93
101
99
100
3. Macro stability
4. Security
5. Basic
human capital
67
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
United States
Finland
Denmark
Switzerland
Sweden
Germany
Singapore
Hong Kong SAR
United Kingdom
Japan
Taiwan
Netherlands
Iceland
Norway
Canada
Australia
France
Austria
Belgium
New Zealand
Luxembourg
Israel
Malaysia
Estonia
Bahrain
Korea
Ireland
Jordan
Chile
Tunisia
United Arab Emirates
China
Thailand
Spain
Slovenia
South Africa
India
Czech Republic
Lithuania
Portugal
Slovak Republic
Malta
Namibia
Latvia
Morocco
Hungary
Egypt
Indonesia
Brazil
Mauritius
Greece
Cyprus
Costa Rica
Panama
El Salvador
Italy
Romania
Botswana
Dominican Republic
Mexico
Vietnam
Algeria
Trinidad and Tobago
Russian Federation
6. Goods market
efficiency
7. Labor market
efficiency
8. Financial
market efficiency
Score
Rank
Score
Rank
Score
Rank
Score
5.01
5.36
5.06
4.95
5.10
4.62
4.81
4.24
4.72
4.75
4.96
4.84
4.73
4.79
4.83
4.89
4.82
4.81
4.88
4.66
3.89
4.51
3.90
4.34
3.56
4.49
4.50
3.68
3.70
3.97
3.52
3.23
3.65
4.30
4.35
3.57
3.67
4.00
4.12
3.78
3.90
3.73
2.84
4.00
3.14
3.96
3.44
3.27
3.61
3.19
4.04
3.69
3.52
3.09
2.80
3.85
3.68
3.03
2.78
3.14
2.85
2.77
3.17
3.75
4
1
3
6
2
19
12
26
17
15
5
9
16
14
10
7
11
13
8
18
35
20
34
24
51
22
21
43
41
31
53
61
46
25
23
50
45
30
27
38
33
40
78
29
67
32
56
60
48
63
28
42
54
69
79
36
44
71
80
66
77
81
65
39
4.59
4.29
4.33
4.36
4.14
4.22
4.80
4.90
4.53
4.02
4.50
4.35
4.27
4.11
4.32
4.38
4.06
4.19
3.97
4.49
4.39
3.88
4.18
4.12
4.14
3.92
4.25
3.72
3.92
3.89
4.38
3.58
3.87
3.72
3.72
3.99
3.67
3.43
3.51
3.65
3.63
3.44
3.59
3.33
3.64
3.40
3.42
3.74
3.48
3.58
3.50
3.86
3.38
3.20
3.25
3.30
3.04
3.50
3.04
3.05
3.32
3.02
3.34
3.22
3
14
12
10
21
17
2
1
4
25
5
11
15
23
13
8
24
18
27
6
7
31
19
22
20
28
16
37
29
30
9
43
32
36
35
26
38
50
45
39
41
49
42
58
40
52
51
34
48
44
46
33
56
71
66
61
77
47
79
76
59
80
57
70
5.05
4.33
4.64
4.79
4.13
3.51
5.11
5.37
4.67
4.35
4.72
4.11
4.91
4.43
4.48
4.19
3.57
3.81
3.81
4.33
4.46
4.17
4.56
4.55
4.32
3.47
4.00
3.99
4.12
4.11
4.77
3.98
4.48
3.64
3.70
3.77
3.78
4.12
3.88
3.86
4.23
3.66
3.91
4.03
4.12
3.92
3.91
3.66
3.82
3.46
3.57
3.79
4.11
3.82
3.98
3.14
3.73
4.20
4.09
3.69
4.08
3.57
3.82
4.03
3
18
9
5
25
82
2
1
8
16
7
31
4
15
13
23
78
56
57
17
14
24
10
11
19
85
37
38
26
32
6
40
12
75
66
61
60
27
46
47
20
72
45
36
28
43
44
74
52
87
77
58
29
54
39
102
65
22
33
69
34
76
53
35
5.93
5.88
5.88
5.59
5.77
5.25
5.61
6.00
6.27
4.43
4.89
5.77
5.27
5.48
5.61
5.76
5.43
5.14
5.33
5.77
5.84
5.43
4.93
5.23
5.22
4.13
5.71
4.65
5.32
4.42
4.68
3.77
4.30
5.05
4.16
5.29
4.85
4.16
4.86
5.17
4.63
4.69
4.76
4.47
4.32
4.55
3.97
4.28
4.76
4.53
4.67
4.49
4.63
5.08
4.76
4.08
4.07
4.50
4.06
4.39
3.72
3.32
4.56
3.61
Rank
3
4
5
14
8
22
12
2
1
52
30
9
21
15
13
10
17
26
18
7
6
16
29
23
24
67
11
40
19
53
38
82
59
28
65
20
32
66
31
25
42
36
34
49
58
44
72
60
33
45
39
47
41
27
35
68
69
46
70
56
85
100
43
91
9. Technological
readiness
Score
Rank
Score
Rank
5.32
5.34
5.31
4.86
5.50
5.09
5.22
5.27
5.03
5.16
5.10
4.86
5.66
5.06
4.69
4.92
4.60
4.86
4.59
4.71
4.52
5.04
4.13
4.59
3.72
5.06
4.34
3.48
4.08
3.47
4.02
3.24
3.48
4.12
4.22
3.71
3.44
4.27
3.78
3.95
3.87
4.11
3.07
3.69
2.91
3.73
3.15
2.99
3.69
3.18
3.56
3.87
2.94
3.40
3.04
4.11
3.24
2.94
3.19
3.25
2.46
2.31
2.84
2.81
4
3
5
17
2
10
7
6
14
8
9
16
1
12
20
15
21
18
22
19
24
13
28
23
39
11
25
45
32
47
33
54
46
29
27
40
48
26
37
34
36
30
60
41
67
38
58
64
42
57
44
35
66
49
61
31
53
65
56
52
88
94
72
73
4.20
2.05
2.12
2.15
2.06
2.93
2.02
2.16
2.47
2.82
2.12
2.21
1.67
1.64
1.88
1.54
2.44
1.99
2.15
1.52
1.83
2.05
1.74
1.34
1.30
2.16
1.86
1.43
1.40
1.46
1.51
3.74
1.65
1.88
1.65
1.44
2.16
1.60
1.48
1.47
1.38
1.48
1.26
1.31
1.48
1.49
1.51
1.75
1.69
1.49
1.47
1.49
1.59
1.34
1.42
2.38
1.40
1.29
1.28
1.74
1.28
1.18
1.24
1.66
1
18
15
12
16
3
19
10
5
4
14
8
29
33
21
37
6
20
13
39
24
17
26
65
68
9
23
56
59
51
41
2
32
22
31
54
11
34
47
50
61
46
76
67
48
43
40
25
28
45
49
44
35
66
58
7
60
71
75
27
74
92
82
30
(contd)
5. Advanced
human capital
Country
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
Jamaica
Sri Lanka
Turkey
Ghana
Colombia
Bulgaria
Uruguay
Poland
Ukraine
Philippines
Argentina
Peru
Nigeria
Uganda
Croatia
Venezuela
Gambia
Macedonia, FYR
Guatemala
Kenya
Madagascar
Georgia
Pakistan
Ecuador
Honduras
Paraguay
Zambia
Nicaragua
Malawi
Bangladesh
Bolivia
Serbia and Montenegro
Tanzania
Bosnia and Hercegovina
Mali
Mozambique
Zimbabwe
Ethiopia
Chad
Angola
6. Goods market
efficiency
7. Labor market
efficiency
8. Financial
market efficiency
Score
Rank
Score
Rank
Score
Rank
Score
3.21
2.87
3.18
2.71
3.08
3.63
3.49
3.83
3.55
3.37
3.57
3.03
2.73
2.51
3.39
2.88
2.54
3.31
2.33
2.76
2.26
3.01
2.18
2.53
2.05
2.37
2.54
2.40
2.37
2.21
2.71
3.12
2.20
2.88
2.11
1.99
2.74
1.98
1.62
1.57
62
76
64
86
70
47
55
37
52
58
49
72
84
90
57
75
87
59
94
82
95
73
98
89
100
93
88
91
92
96
85
68
97
74
99
101
83
102
103
104
3.27
3.30
3.26
3.39
3.18
3.23
3.04
2.90
2.88
3.19
2.90
2.92
3.28
3.39
2.92
2.62
3.39
2.82
2.81
3.24
2.94
2.57
3.27
2.47
2.54
2.87
3.11
2.41
2.93
2.97
2.55
2.97
3.25
2.89
3.09
2.66
2.68
2.59
2.33
2.30
63
60
65
54
73
69
78
87
90
72
88
85
62
53
86
96
55
92
93
68
83
98
64
101
100
91
74
102
84
81
99
82
67
89
75
95
94
97
103
104
3.96
3.51
3.68
3.95
3.66
3.66
3.48
3.23
3.78
3.74
3.30
3.57
3.83
3.86
3.41
3.39
4.11
3.69
3.48
3.76
3.85
4.21
3.23
3.22
3.33
3.31
3.82
3.55
3.69
3.42
3.09
3.75
3.84
3.37
3.46
3.28
2.75
3.45
3.30
3.36
41
81
70
42
73
71
84
99
59
64
97
79
51
48
90
91
30
68
83
62
49
21
100
101
94
95
55
80
67
89
103
63
50
92
86
98
104
88
96
93
4.47
4.41
3.68
4.69
4.40
3.75
3.83
3.99
3.25
3.84
3.68
4.47
3.96
4.23
3.69
3.72
4.28
3.70
3.86
4.36
3.82
3.64
4.44
3.39
3.58
3.57
4.27
3.96
4.18
3.81
3.56
3.33
3.97
3.46
3.89
3.61
3.29
3.27
3.28
3.37
Rank
50
54
88
37
55
83
79
71
104
78
89
48
74
63
87
84
61
86
77
57
80
90
51
97
93
94
62
75
64
81
95
99
73
96
76
92
101
103
102
98
9. Technological
readiness
Score
Rank
Score
Rank
3.63
2.71
3.30
2.72
2.84
3.01
2.88
3.29
2.49
3.00
3.07
2.75
2.62
2.76
3.20
2.87
2.48
2.26
2.71
2.65
2.55
2.42
2.90
2.49
2.20
2.42
2.58
2.08
2.33
2.23
2.22
2.49
2.57
2.21
2.45
2.19
2.38
1.75
1.72
1.83
43
78
50
76
71
62
69
51
84
63
59
75
80
74
55
70
87
95
77
79
83
91
68
85
99
90
81
101
93
96
97
86
82
98
89
100
92
103
104
102
1.45
1.35
1.50
1.22
1.44
1.22
1.20
1.58
1.43
1.54
1.25
1.26
1.38
1.29
1.36
1.16
1.25
1.18
1.29
1.29
1.16
1.25
1.44
1.19
1.21
1.06
1.26
1.08
1.30
1.16
1.16
1.17
1.19
1.20
1.21
1.14
1.04
1.08
1.09
1.12
52
64
42
83
55
84
88
36
57
38
80
77
62
72
63
96
81
91
73
70
94
79
53
89
86
103
78
102
69
95
97
93
90
87
85
98
104
101
100
99
69
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
United States
Finland
Denmark
Switzerland
Sweden
Germany
Singapore
Hong Kong SAR
United Kingdom
Japan
Taiwan
Netherlands
Iceland
Norway
Canada
Australia
France
Austria
Belgium
New Zealand
Luxembourg
Israel
Malaysia
Estonia
Bahrain
Korea
Ireland
Jordan
Chile
Tunisia
United Arab Emirates
China
Thailand
Spain
Slovenia
South Africa
India
Czech Republic
Lithuania
Portugal
Slovak Republic
Malta
Namibia
Latvia
Morocco
Hungary
Egypt
Indonesia
Brazil
Mauritius
Greece
Cyprus
Costa Rica
Panama
El Salvador
Italy
Romania
Botswana
Dominican Republic
Mexico
Vietnam
Algeria
Trinidad and Tobago
Russian Federation
11. Business
sophistication
12. Innovation
Score
Rank
Score
Rank
5.66
5.34
5.23
5.25
5.33
5.49
4.81
4.85
5.24
5.60
5.13
5.18
4.75
4.83
5.08
4.87
5.15
4.99
4.99
4.78
4.58
4.75
4.47
3.96
3.91
4.64
4.74
3.68
4.22
4.06
4.48
4.01
4.21
4.45
4.05
4.47
4.56
4.04
4.07
3.96
3.91
3.46
3.51
3.75
4.00
3.67
4.09
3.93
4.49
3.75
3.86
3.80
3.92
3.72
3.58
4.54
3.47
3.34
3.52
3.82
3.17
3.02
3.75
3.71
1
4
8
6
5
3
18
16
7
2
11
9
21
17
12
15
10
14
13
19
24
20
30
43
48
23
22
62
32
36
28
39
33
31
37
29
25
38
35
42
47
75
69
55
40
63
34
44
27
54
49
52
46
59
67
26
72
80
68
51
87
93
56
60
4.70
4.06
3.61
3.97
4.06
3.98
3.49
2.94
3.52
4.28
3.74
3.46
3.19
3.18
3.38
3.21
3.45
3.24
3.29
2.96
2.93
3.82
2.90
2.56
2.10
3.11
3.01
2.40
2.32
2.58
2.32
2.84
2.41
2.61
2.76
2.73
2.82
2.67
2.53
2.43
2.41
2.10
2.15
2.11
2.28
2.50
2.27
2.60
2.61
2.21
2.40
2.07
2.45
2.06
1.79
2.43
2.28
2.24
1.89
2.23
2.10
1.98
2.18
2.56
1
3
9
6
4
5
11
23
10
2
8
12
18
19
14
17
13
16
15
22
24
7
25
36
73
20
21
44
49
34
50
26
42
31
28
29
27
30
37
40
43
74
67
70
55
38
56
33
32
60
45
77
39
79
95
41
53
57
90
59
75
88
63
35
(contd)
Country
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
Jamaica
Sri Lanka
Turkey
Ghana
Colombia
Bulgaria
Uruguay
Poland
Ukraine
Philippines
Argentina
Peru
Nigeria
Uganda
Croatia
Venezuela
Gambia
Macedonia, FYR
Guatemala
Kenya
Madagascar
Georgia
Pakistan
Ecuador
Honduras
Paraguay
Zambia
Nicaragua
Malawi
Bangladesh
Bolivia
Serbia and Montenegro
Tanzania
Bosnia and Hercegovina
Mali
Mozambique
Zimbabwe
Ethiopia
Chad
Angola
11. Business
sophistication
12. Innovation
Score
Rank
Score
Rank
3.66
3.46
3.99
3.40
3.79
3.34
3.22
3.68
3.74
3.60
3.63
3.47
3.85
3.36
3.38
3.24
3.48
3.11
3.32
3.73
3.28
2.73
3.92
3.12
2.95
2.94
3.48
2.68
3.07
3.09
2.74
3.13
3.33
2.89
2.86
2.67
3.31
2.73
2.61
2.35
64
74
41
76
53
79
86
61
57
66
65
73
50
78
77
85
71
90
82
58
84
99
45
89
94
95
70
101
92
91
98
88
81
96
97
102
83
100
103
104
2.33
2.15
2.17
2.23
2.20
2.03
2.11
2.30
2.32
2.08
2.00
1.81
2.28
2.37
2.21
2.04
2.06
2.03
1.88
2.33
2.14
1.98
1.96
1.76
1.64
1.55
2.04
1.64
2.06
1.74
1.61
2.15
2.13
1.81
2.10
1.85
1.99
1.74
1.47
1.41
47
65
64
58
62
84
71
52
51
76
85
94
54
46
61
81
80
83
91
48
68
87
89
96
99
102
82
100
78
97
101
66
69
93
72
92
86
98
103
104
Notes
1 We thank Jennifer Blanke and Augusto Lopez-Claros for their thoughts
and long conversations over the last few months. We also thank
Catherine Vindret for extraordinarily able research assistance and
Michael Porter and Christian Kettels for comments on an earlier
draft.
2 This definition is similar to the one used by Porter (2004).
3 Competitiveness, on the other hand, should NOT be characterized as a
countrys share of world markets for its products. As suggested by
Porter (2003), the competitiveness of a nation is not a zero-sum
game in which one countrys gain comes at the expense of others.
It is important to emphasize that this is a flawed definition of competitiveness because it has been widely used to justify intervention
to tilt markets in ones favor. Countries have engaged in industrial
policy, provided subsidies, and devalued their currencies all in the
hope of expanding exports at their neighbors expense, all in the
hope of improving a countrys competitiveness. Subsidies, however, shift resources away from the most productive activities, and
devaluations (even when they are called competitive devaluations)
are nothing but a reduction of the price of ones products and are a
signal that the firms are not competitive enough. Moreover, devaluations tend to increase the price of imported capital goods, which
tends to make domestic firms even less competitive.
4 The idea was that the growth rate of a country depended only on the
fraction of its GDP that it invested. If the savings generated by its
citizens were not enough to finance the investment required to
achieve the desired growth rate, the World Bank would finance the
difference (this is why this line of thought was, and still is, called the
financing gap). See Easterlys chapter in this volume for more on
the role of investment as an engine of growth.
5 Schumpeter (1942), Solow (1956), and Swan (1956). Recent research
on the importance of R&D for growth includes Romer (1990), Aghion
and Howitt (1992), and Grossman and Helpman (1991). See Aghion
and Howitt (1992) and Barro and Sala-i-Martin (2003) for a technical
exposition of technology-based growth theories.
6 See Acemoglu et al. (2001 and 2002); Rodrik, Subramanian, and Trebi
(2002); Easterly and Levine (1997); and Sala-i-Martin and
Subramanian (2003).
Concluding Remarks
This chapter presents a new index of competitiveness
based on 12 pillars that capture the complex nature of the
determinants of the productivity of nations.The pillars are
comprised of institutions, physical infrastructures, macroeconomic stability, personal security, human capital, the
efficiency of the goods, labor and financial markets, technological readiness, market size, business sophistication,
and innovation.
The 12 pillars are aggregated into three subindexes
called basic requirements, efficiency enhancers, and innovation
factors.These subindexes are cast in a framework of stages
of development in which different factors matter differently at different stages of economic development. In the
first stage of development, (the factor-driven stage), the
key factors are the basic requirements. In the second stage,
(the efficiency-driven stage), the most important are the
efficiency enhancers. In the last stage, (the innovationdriven stage), the central inputs are the innovation factors.
The index is computed for 104 countries and world
competitiveness rankings are provided.The United States
is the most competitive economy in the world, followed
by Finland, Denmark, Switzerland, Sweden, Germany,
Singapore, Hong Kong, the United Kingdom, and Japan.
At the lower end, Angola is the worst-ranked economy in
the world, followed by Chad, Ethiopia, Zimbabwe,
Mozambique, Mali, Bosnia-Hercegovina,Tanzania, and
Serbia-Montenegro.
The disaggregated nature of the 12 pillars allows us to
pin down the most and least favorable components of
competitiveness for each country.
71
22 Technical note: These weights were chosen using a maximum likelihood method of an econometric model that had the growth rate of
per capita GDP between 1960 and 2000 as the explanatory variable,
and various proxies for basic requirements, efficiency enhancers,
and innovation factors as dependant variables. The regression
allowed countries in different stages to have different coefficients.
The coefficients that maximized likelihood, then, were rounded
and became the weights for each stage reported in Table 1.
A related and interesting point for future research is that the stages
of development theory suggests that econometric analysis that
forces all countries to have the same regression coefficients is misspecified. Thus, empirical results that suggest that certain variables
are not robustly correlated with economic growth, with competitiveness or with productivity are flawed. See Sala-i-Martin, Doppelhofer,
and Miller (2004) for a paper on robust econometric methods in
cross-country growth regressions.
23 Note that the Growth Competitive Index, the only index of the GCR
that actually allows for two stages of the development, introduces a
discrete jump as countries move from non-core to core economies.
Since the definition of core economy is based exclusively on the
number of patents (core economies are those with more than 15
patents per million population and a non-core country is one that has
fewer than that), as a country increases its innovation effort and
moves across the 15-patent threshold, the weights assigned to each
subindex change discretely. It could, therefore, be the case that a
country that increases its innovation rate ends up suffering a dramatic fall in the ranks. Although this has never happened since the GCI
was first introduced in 2001, this is a potential problem and an additional reason why the GCI needs to be improved.
72
References
Acemoglu, D., S. Johnson, and J. Robinson. 2001. The Colonial Origins
of Comparative Development: An Empirical Investigation, American
Economic Review 91: 13691401.
Acemoglu, D., S. Johnson, and J. Robinson. 2002. Reversal of Fortune:
Geography and Institutions in the Making of the Modern World
Distribution of Income, Quarterly Journal of Economics 117(4):
12311294.
73
Appendix 1: How Executive Opinion Survey questions and hard data are assigned to each pillar 1
This appendix provides details on how the Global
Competitiveness Index is constructed. All of the Survey
and hard data variables used in this index can be found
in the data tables section of this Report with more
detailed descriptions.
1st Pillar: Institutions
74
C. Transparency
2. Private Institutions
A. Honesty
B. Accountability
Advanced human capital is an average of three components: the quantity of education, the quality of the
education system, and on-the-job training.
The Survey questions and hard data used in each
component are:
2. Primary Education
(weight = 1/2)
3. On-the-Job Training
The 6th pillar is an average of three subindexes: government-induced distortions, competition, and demand
conditions. Competition, in turn, is a weighted average
of two components: domestic competition and foreign
competition.4
Appendix 1: How Executive Opinion Survey questions and hard data are assigned to each pillar (contd.)
2. Female Participation
3. Meritocracy (incentives/effort):
75
Appendix 1: How Executive Opinion Survey questions and hard data are assigned to each pillar (contd.)
8th Pillar: Financial Markets Efficiency
The 8th pillar is a (weighted) average of three subindexes: efficiency of the financial sector, trustworthiness, and
foreign direct investment.5
The Survey questions that belong to each subindex are:
1. Efficiency
2. Trustworthiness / Confidence
3. FDI
76
B. Quality of exports
Notes
1 See Appendix 2 for a description of how hard data are transformed
into Survey-comparable values. See Appendix 3 for a description of
how we deal with data that are ranked backwards.
2 Half weight to avoid double accountability, as discussed before.
3 See Appendix 4 for a description of how we deal with inflation and
deflation.
4 See Appendix 6 for a description of how the relative weights of
domestic and foreign competition are estimated.
5 See Appendix 7 for a description of the relative weights of FDI and
local financial markets.
6 See Appendix 8 for a description on how this is constructed.
+ 1
77
(intermediate min)
(max min)
+ 1
78
Macro instability
Inflation rate
0%
4%
Appendix 5. How diseases are treated to construct the health component of basic human capital
79
80
local x (local 1)
6
+ FDI x
1 (local 1)
6