Global competitiveness and economic growth: a one-way or two-way relationship?
DOI:
https://doi.org/10.12775/EQUIL.2016.006Keywords:
Global Competitiveness Index;, economic growth, panel Granger causality testAbstract
The Global Competitiveness Index is treated as a standard to measure the competitiveness of countries. Leaders look at it to make policy and resource allocation decisions, because global competitiveness is expected to be related to economic growth. However, studies which analyze the empirical relationship between these two economic categories are very rare. It is still an open question in the literature whether economic growth can be used to predict future global competitiveness or the other way round. This paper empirically tests the relationship between the GCI and the economic growth rate by using a panel Granger causality analysis based on annual data for 114 countries divided into five groups by income criteria and covering the period 2006-2014. We confirm a strong unidirectional causality among the countries analyzed, i.e. GDP growth causes global competitiveness. Additionally, we find that the GCI is successful in predicting economic growth for the majority low income and OCED high income counties, but among the middle income countries this relationship exists only for large economies such as China and India.
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References
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Romer, M. P. (1986). Increasing Returns and Long-Run Growth. The Journal of Political Economy, 94(5). http://dx.doi.org/10.1086/261420.
Romer, P. (1990). Endogenous Technological Change. Journal of Political Economy, 98(S5) http://dx.doi.org/10.1086/261725.
Rugman, A. M. (1990). Global Corporate Strategy and Trade Policy. London and New York: Routledge.
Rugman, A. M. (1991). Diamond in the Rough. Business Quarterly, 55(3).
Rugman, A. M. & D?Cruz, J. R. (1993). The ?Double Diamond? Model of International Competitiveness: the Canadian Experience. Management International Review, Special Issue, 33.
Schwab, K. (2015). The Global Competitiveness Report 2014-2015. Retrieved from http://www.weforum.org. (28.02.2015).
Smit, A. J. (2010). The Competitive Advantage of Nations: Is Porter?s Diamond Framework a New Theory that Explains the International Competitiveness of Countries? Southern African Business Review, 14 (1).
Stel, A. van, Carree, M. & Thurik, A. R. (2005). The Effect of Entrepreneurial Activity on National Economic Growth. Small Business Economics, 24(3). http://dx.doi.org/10.1007/s11187-005-1996-6.
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Weinhold, D. (1996). Investment, Growth and Causality Testing in Panels. Economie et Prevision, 126.
Weinhold, D. (1999). A Dynamic ?Fixed Effects? Model for Heterogeneous Panel Data. Unpublished manuscript, London School of Economics.
World Bank, (2015). Data indicator: GDP, PPP (current international $). Retrieved from http://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD (01.03.2015).
Xia, R., Liang, T., Zhang, Y. & Wu, S. (2012). Is Global Competitive Index a Good Standard to Measure Economic Growth? A Suggestion for Improvement. International Journal of Services and Standards, 8(1). http://dx.doi.org/10.1504/IJSS.2012.048438.
Bai, S. (2009). Measuring Financial Integration in the BRIC Nations. International Journal of Services and Standards, 5(3). http://dx.doi.org/10.1504/ IJSS.2009.028676.
Barro, R. (1990). Government Spending in a Simple Model of Economic Growth. Journal of Political Economy, 98(5). http://dx.doi.org/10.1086/261726.
Ben Amar, M., & Hamdi, M. T. (2012). Global Competitiveness and Economic Growth: Empirical Verification for African Countries. International Journal of Economics and Finance, 4(6). http://dx.doi.org/10.5539/ijef.v4n6p125.
Berger, T. (2008). Concepts on National Competitiveness. Journal of International Business and Economy, 9(1).
Berger, T. & Bristow, G. (2009). Competitiveness and the Benchmarking of Nations ? A Critical Reflection. International Advances in Economic Research, 15(4). http://dx.doi.org/10.1007/s11294-009-9231-x.
Boltho, A. (1996). The assessment: international competitiveness. Oxford Review of Economic Policy, 12(3). http://dx.doi.org/10.1093/oxrep/12.3.1.
Carvalho, L., Di Serio, L. & Vasconcellos, M. (2012). Competitiveness of Nations: Review of the Metric Used by the World Economic Forum. Revista de Administraç?o de Empresas, 52(4). http://dx.doi.org/10.1590/S0034-7590201200 0400005.
Chamberlain, G. (1984). Panel Data. In Z. Griliches & M. D. Intriligator (Eds.). Handbook of Econometrics volume II. Amsterdam: North ? Holland Publishing Co.
Davies, H. & Ellis, P. D. (2000). Porter?s ?Competitive Advantage of Nations?: Time for a final judgment? Journal of Management Studies, 37(8). http://dx.doi.org/10.1111/1467-6486.00221.
Dunning, J. H. (1992). Multinational enterprises and the global economy. Woking- ham, UK and Reading, MA: Addison-Wesley Publishing Company.
Dunning, J. H. (1993). The globalization of business. London and New York: Routledge.
Freudenberg, M. (2003). Composite Indicators of Country Performance: A Critical Assessment, OECD Science, Technology and Industry Working Papers, 2003/16. http://dx.doi.org/10.1787/405566708255.
Garden, C., & Martin, R. L. (2005). A Study on the Factors of Regional Competitiveness: A Draft Final Report for the European Commission Directorate-General Regional Policy. Retrieved from http://ec.europa.eu/regional_policy/ sources/docgener/studies/pdf/3cr/competiti veness.pdf (2.03.2015).
Grossman, G., & Helpman, E. (1991). Quality Ladders and Product Cycles. Quarterly Journal of Economics, 106(2). http://dx.doi.org/10.2307/2937947.
Harris, R. D. F., & Tzavalis, E. (1999). Inference for Unit Roots in Dynamic Panels where the Time Dimension is Fixed. Journal of Econometrics, 91(2). http://dx.doi.org/10.1016/S0304-4076(98)00076-1.
Holtz-Eakin, D., Newey W., & Rosen, H. (1985). Implementing Causality Tests with Panel Data, with an Example from Fiscal Public Finance. NBER Technical Working Paper, 48. http://dx.doi.org/10.3386/t0048.
Hsiao, C. (1989). Modelling Ontario Regional Electricity System Demand Using a Mixed Fixed and Random Coefficients Approach. Regional Science and Urban Economics, 19(4). http://dx.doi.org/10.1016/0166-0462(89)90020-3.
Hurlin, C., & Venet, B. (2001). Granger Causality Tests in Panel Data Models with Fixed Coefficients. EURIsCO Université Paris Dauphine, 2001-09.
Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1). http://dx.doi.org/10.1016/S0304-4076(03)00092-7.
Judson, R. A., Owen A. L. (1999). Estimating dynamic panel data models: a guide for macroeconomists. Economics Letters, 65(1). http://dx.doi.org/10.1016 /S0165-1765(99)00130-5.
Kiviet, J. F. (1995). On bias, inconsistency, and efficiency of various estimators in dynamic panel data models. Journal of Econometrics, 68(1). http://dx.doi.org/1 0.1016/0304-4076(94)01643-E.
Koong, K. S., Flores, J., Sun, J. & Liu, L. C. (2011). Health information technology performance measures: a lifecycle analysis. International Journal of Services and Standards, 7(3/4). http://dx.doi.org/10.1504/IJSS.2011.045048.
Lall, S. (2001). Competitiveness Indices and Developing Countries: An Economic Evaluation of the Global Competitiveness Report. World Development, 29(9). http://dx.doi.org/10.1016/S0305-750X(01)00051-1.
Lopez-Claros, A., Altinger, L., Blanke, J., Drzeniek, M. & Mia, I. (2006). The Global Competitiveness Index: Identifying the Key Elements of Sustainable Growth. The Global Competitiveness Report 2006-2007, World Economic Forum, Palgrave Macmillan.
Lucas, R. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics, 22(1). http://dx.doi.org/10.1016/0304-3932(88)90168-7.
Nair-Reichert, U. & Weinhold, D. (2001). Causality Tests for Cross-Country Panels: A New Look at FDI and Economic Growth in Developing Countries. Oxford Bulletin of Economics and Statistics, 63(2). http://dx.doi.org/10.1111 /1468-0084.00214.
Olczyk, M. (2008). Konkurencyjność ? Teoria i praktyka. Warszawa: Wydawnictwo Fachowe CEDEWU.
Pagano, M. (1993). Financial Markets and Growth: an Overview. European Economic Review, 37(2-3). http://dx.doi.org/10.1016/0014-2921(93)90051-B.
Porter, M. E. (1990). The competitive advantage of nations. London: Macmillan.
Qin, H., Prybutok, V. R., & Peak, D. A. (2009). Service Quality in the USA and mainland China?s fast-food restaurants. International Journal of Services and Standards, 5(4). http://dx.doi.org/10.1504/IJSS.2009.032174.
Romer, M. P. (1986). Increasing Returns and Long-Run Growth. The Journal of Political Economy, 94(5). http://dx.doi.org/10.1086/261420.
Romer, P. (1990). Endogenous Technological Change. Journal of Political Economy, 98(S5) http://dx.doi.org/10.1086/261725.
Rugman, A. M. (1990). Global Corporate Strategy and Trade Policy. London and New York: Routledge.
Rugman, A. M. (1991). Diamond in the Rough. Business Quarterly, 55(3).
Rugman, A. M. & D?Cruz, J. R. (1993). The ?Double Diamond? Model of International Competitiveness: the Canadian Experience. Management International Review, Special Issue, 33.
Schwab, K. (2015). The Global Competitiveness Report 2014-2015. Retrieved from http://www.weforum.org. (28.02.2015).
Smit, A. J. (2010). The Competitive Advantage of Nations: Is Porter?s Diamond Framework a New Theory that Explains the International Competitiveness of Countries? Southern African Business Review, 14 (1).
Stel, A. van, Carree, M. & Thurik, A. R. (2005). The Effect of Entrepreneurial Activity on National Economic Growth. Small Business Economics, 24(3). http://dx.doi.org/10.1007/s11187-005-1996-6.
Waverman, L. (1995). A Critical Analysis of Porter?s Framework on the Competitive Advantage of Nations. In A. Rugman, Van den Broeck, J. & Verbeke, A. (Eds.), Research in Global Strategic Management: Volume V. Beyond the Diamond. Greenwich, CT: JAI Press.
Weinhold, D. (1996). Investment, Growth and Causality Testing in Panels. Economie et Prevision, 126.
Weinhold, D. (1999). A Dynamic ?Fixed Effects? Model for Heterogeneous Panel Data. Unpublished manuscript, London School of Economics.
World Bank, (2015). Data indicator: GDP, PPP (current international $). Retrieved from http://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD (01.03.2015).
Xia, R., Liang, T., Zhang, Y. & Wu, S. (2012). Is Global Competitive Index a Good Standard to Measure Economic Growth? A Suggestion for Improvement. International Journal of Services and Standards, 8(1). http://dx.doi.org/10.1504/IJSS.2012.048438.
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Published
31-03-2016
Issue
Section
Determinants of growth in European Union countries
How to Cite
Kordalska, A. K., & Olczyk, M. (2016). Global competitiveness and economic growth: a one-way or two-way relationship?. Equilibrium. Quarterly Journal of Economics and Economic Policy, 11(1), 121-142. https://doi.org/10.12775/EQUIL.2016.006
