• Agenda
  • Initiatives
  • Reports
  • Events
  • About
    • Our Mission
    • Leadership and Governance
    • Our Members and Partners
    • Communities
    • History
    • Klaus Schwab
    • Media
    • Contact Us
    • Careers
    • World Economic Forum USA
    • Privacy and Terms of Use
  • EN ES FR 日本語 中文
  • Login to TopLink

We use cookies to improve your experience on our website. By using our website you consent to all cookies in accordance with our updated Cookie Notice.

I accept
    Hamburger
  • World Economic Forum Logo
  • Agenda
  • Initiatives
  • Reports
  • Events
  • About
  • TopLink
  • Search Cancel

Report Home

  • Report Highlights
  • Competitiveness Rankings
  • Interactive Heatmap
  • Competitiveness Dataset (XLS)
  • Blogs and Opinions
  • Top 10 Infographics
  • Videos
  • Press Releases
  • [ — Divider — ]
  • Preface
  • Chapter 1.1 Reaching Beyond the New Normal: Findings from the Global Competitiveness Index 2015–2016
    • Introduction
    • Methodology
    • The Global Competitiveness Index 2015–2016
    • Results overview
    • Country highlights
    • Conclusions
    • References
    • Box 1: The Inclusive Growth and Development Report
    • Box 2: The Case for Trade and Competitiveness
    • Box 3: The most problematic factors for doing business: Impacts of the global crisis
    • Box 4: China’s new normal
    • Appendix: Methodology and Computation of the Global Competitiveness Index 2015–2016
  • Chapter 1.2 Drivers of Long-Run Prosperity: Laying the Foundations for an Updated Global Competitiveness Index
    • Introduction
    • What competitiveness is and why it matters
    • Institutions
    • Infrastructure and connectivity
    • Macroeconomic environment
    • Health
    • Education
    • Product and service market efficiency
    • Labor market efficiency
    • Financial market efficiency
    • Technological adoption
    • Market size
    • Ideas ecosystem
    • Ideas implementation
    • Conclusions
    • Bibliography
    • Appendix A: Measurement of Key Concepts and Preliminary Index Structure
    • Appendix B: Acknowledgments
  • Chapter 1.3 The Executive Opinion Survey: The Voice of the Business Community
    • Introduction
    • The Survey in numbers
    • Survey structure, administration, and methodology
    • Data treatment and score computation
    • Conclusions
    • Box 1: Example of a typical Survey question
    • Box 2: Insights from the Executive Opinion Survey 2015
    • Box 3: Score calculation
  • Competitiveness Practices
  • FAQs
  • Partner Institutes
  • Downloads
  • Competitiveness Library
  • About the Authors
  • Contact Us
Global Competitiveness Report 2015 Home
  • Report Home
  • Report Highlights
  • Competitiveness Rankings
  • Interactive Heatmap
  • Competitiveness Dataset (XLS)
  • Blogs and Opinions
  • Top 10 Infographics
  • Videos
  • Press Releases
  • [ — Divider — ]
  • Preface
  • Chapter 1.1 Reaching Beyond the New Normal: Findings from the Global Competitiveness Index 2015–2016
    • Introduction
    • Methodology
    • The Global Competitiveness Index 2015–2016
    • Results overview
    • Country highlights
    • Conclusions
    • References
    • Box 1: The Inclusive Growth and Development Report
    • Box 2: The Case for Trade and Competitiveness
    • Box 3: The most problematic factors for doing business: Impacts of the global crisis
    • Box 4: China’s new normal
    • Appendix: Methodology and Computation of the Global Competitiveness Index 2015–2016
  • Chapter 1.2 Drivers of Long-Run Prosperity: Laying the Foundations for an Updated Global Competitiveness Index
    • Introduction
    • What competitiveness is and why it matters
    • Institutions
    • Infrastructure and connectivity
    • Macroeconomic environment
    • Health
    • Education
    • Product and service market efficiency
    • Labor market efficiency
    • Financial market efficiency
    • Technological adoption
    • Market size
    • Ideas ecosystem
    • Ideas implementation
    • Conclusions
    • Bibliography
    • Appendix A: Measurement of Key Concepts and Preliminary Index Structure
    • Appendix B: Acknowledgments
  • Chapter 1.3 The Executive Opinion Survey: The Voice of the Business Community
    • Introduction
    • The Survey in numbers
    • Survey structure, administration, and methodology
    • Data treatment and score computation
    • Conclusions
    • Box 1: Example of a typical Survey question
    • Box 2: Insights from the Executive Opinion Survey 2015
    • Box 3: Score calculation
  • Competitiveness Practices
  • FAQs
  • Partner Institutes
  • Downloads
  • Competitiveness Library
  • About the Authors
  • Contact Us

What competitiveness is and why it matters

Share

Our conceptual definition of competitiveness remains unchanged. We continue to define competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country. We focus on productivity because growth models suggest that, in the long run, productivity is the most fundamental factor explaining the level of prosperity of a country and hence its citizens.

Since Adam Smith’s work (1776), economists have identified, theoretically and empirically, dozens of possible factors—both within and outside firms—affecting the level and growth rates of productivity and prosperity across countries. These range from the institutional framework discussed by Smith, which allows for division of labor and exchange, to the most recent studies on connectivity as a source of business innovation. They include factors such as macroeconomic stability, corruption (or the absence of it), security, education (both basic and advanced), the health of the labor force, regulation, financial development, the efficient use of talent, the right incentives for firms to invest in research and development (R&D), market size, the participation of women in the workforce, and the use of modern production and distribution techniques.

Each proposed factor rests on solid theoretical grounds and is backed by empirical evidence. Because the development process is complex and economic theories are open ended, any effort to identify one single factor that matters above all others is misguided. Indeed, all of these factors could be in place at the same time.

Academic research since the 1950s has formalized several of these ideas in mathematical terms.3 It has provided empirical evidence that capital accumulation is not sufficient to explain differences in countries’ prosperity, and total factor productivity (TFP) is the main long-run engine of growth, living standards, and prosperity. The term productivity is widely used as shorthand for TFP.

To reflect the complexity of the economic development process, the GCI embraces a wide array of determinants of a country’s productivity at both the macro- and microeconomic levels. Most of the suggested drivers of productivity are linked to one another, which makes any attempt to measure competitiveness more challenging. For the sake of clarity, simplicity, and intellectual organization, we divide the potential factors affecting competitiveness that we have identified into 12 categories that will translate into the 12 pillars of the updated GCI. This categorization is intended to provide guidance for policymakers in the form of a tool that gives information on the competitive strengths and weaknesses of their respective economies.

The 12 sections below offer a conceptual discussion to restate or update the relevance of each productivity factor in light of the current state of academic research. At the time of publication of this Report, the update of the GCI is still a work in progress, so what we present here is our current thinking on those factors that drive competitiveness; we expect to refine our approach in the coming year through a series of consultations with academics, practitioners, and policymakers. Despite improvements in measurements, some areas still suffer from a scarcity of reliable data that cover the large sample size of the GCI, so that the elements presented in each section may not necessarily be implemented in the final, updated GCI. In an attempt to stimulate discussion on relevant indicators to capture the concepts outlined above, we present potential indicators for each of the drivers of competitiveness that we have identified to date in Appendix A to this chapter.

3
3 Since Solow’s seminal 1956 paper “A Contribution to the Theory of Economic Growth,” a large empirical literature based on aggregate production functions (Barro 1991) attributes differences among countries’ income to the accumulation of physical capital, human capital, and productivity.
Back to Top
Subscribe for updates
A weekly update of what’s on the Global Agenda
Follow Us
About
Our Mission
Leadership and Governance
Our Members and Partners
The Fourth Industrial Revolution
Centre for the Fourth Industrial Revolution
Communities
History
Klaus Schwab
Our Impact
Media
Pictures
A Global Platform for Geostrategic Collaboration
Careers
Open Forum
Contact Us
Mapping Global Transformations
Code of Conduct
World Economic Forum LLC
Sustainability
World Economic Forum Privacy Policy
Media
News
Accreditation
Subscribe to our news
Members & Partners
Member login to TopLink
Strategic Partners' area
Partner Institutes' area
Global sites
Centre for the Fourth Industrial Revolution
Open Forum
Global Shapers
Schwab Foundation for Social Entrepreneurship
EN ES FR 日本語 中文
© 2022 World Economic Forum
Privacy Policy & Terms of Service