A framework for evaluating the dynamic competitiveness of countries

Abstract

This paper presents a framework for evaluating the competitive position of nations which relates competitiveness to the concept of welfare maximization. Consequently it includes an evaluation of wages and productivity, as well as the social and environmental standards at which this result is achieved. In relation to other concepts the role of external balances and of low costs is put into perspective in this concept, the technology, product differentiation and other determinants of qualitative competitiveness are emphasized. We specifically try to incorporate soft factors of competitiveness by the use of the indicator unit value, an indicator rising with higher quality or consumer evaluation of a product. We also use this indicator to discriminate between markets in which firms are competing in prices or in quality. It is specifically rewarding to apply the broader concept of competitiveness and the notion of competing in quality to the German debate on competitiveness. The trade balance is positive, nevertheless Germany is afraid to deindustrialize and to loose competitiveness due to high wages and high tax rates ('Standortdebatte'). We evaluate the macroeconomic performance, the technological position and the concentration of exports in sectors where quality competition prevails to evaluate the dynamic competitiveness of this country. © 1998 Elsevier Science B.V.