national competition

Topics: Macroeconomics, Economics, Productivity Pages: 27 (6974 words) Published: October 29, 2013
NBER WORKING PAPER SERIES

THE DETERMINANTS OF NATIONAL COMPETITIVENESS
Mercedes Delgado
Christian Ketels
Michael E. Porter
Scott Stern
Working Paper 18249
http://www.nber.org/papers/w18249
NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
July 2012

The authors would like to acknowledge invaluable guidance from Antonio Ciccone, and essential data analysis by Rich Bryden. Albert Bravo-Biosca, Aart Kraay and Giuseppe Iarossi offered very helpful suggestions. We are also grateful to the World Economic Forum’s Global Competitiveness Network team, and the participants in the seminars at the World Bank, the Inter-American Development Bank, Orkestra, Temple University, BI Norwegian Business School, Tsinghua University, Drexel University, Lehigh University, and MOC faculty workshop for very helpful comments. The authors at various times made compensated presentations at meetings that focused on issues of national competitiveness, using the data and results presented in the enclosed paper. This work was funded in part by the World Economic Forum. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

© 2012 by Mercedes Delgado, Christian Ketels, Michael E. Porter, and Scott Stern. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.

The Determinants of National Competitiveness
Mercedes Delgado, Christian Ketels, Michael E. Porter, and Scott Stern NBER Working Paper No. 18249
July 2012
JEL No. O12,O47,O5
ABSTRACT
We define foundational competitiveness as the expected level of output per working-age individual that is supported by the overall quality of a country as a place to do business. The focus on output per potential worker, a broader measure of national productivity than output per current worker, reflects the dual role of workforce participation and output per worker in determining a nation’s standard of living. Our framework highlights three broad and interrelated drivers of foundational competitiveness: social infrastructure and political institutions, monetary and fiscal policy, and the microeconomic environment. We estimate this framework using multiple data sets covering more than 130 countries over the 2001-2008 period. We find a positive and separate influence of each driver on output per potential worker. The microeconomic environment has a positive effect on output per potential worker even after controlling for historical legacies. Using our framework we define a new concept, global investment attractiveness, which is the cost of factor inputs relative to a country’s competitiveness. This analysis reveals important insight into the economic trajectory of individual countries. Our framework also offers a novel methodology for the estimation of a theoretically grounded and empirically validated measure of national competitiveness.

Mercedes Delgado
Temple University and ISC
Fox School of Business
Alter Hall 542
1801 Liacouras Walk
Philadelphia, PA 19122
mdelgado@temple.edu
Christian Ketels
Institute for Strategy
and Competitiveness
Harvard University
cketels@hbs.edu

Michael E. Porter
Harvard University
Institute for Strategy
and Competitiveness
Ludcke House
Harvard Business School
Soldiers Field Road
Boston, MA 02163
mporter@hbs.edu
Scott Stern
MIT Sloan School of Management
100 Main Street, E62-476
Cambridge, MA 02142
and NBER
sstern@mit.edu

1.

Introduction
“The President's Council on Jobs and Competitiveness was created to […] ensure the

competitiveness of the United States and [advise the President]...
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