Abstract
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 not successful in predicting economic growth for the majority of the 114 counties, with the exception of few large economies such as China, India, the United States and Russia.
Highlights
National competitiveness is one of the most central preoccupations for both advanced and developing countries (Porter, 1990) and "many policy makers express serious concerns about it" (Lall, 2001, p.1501)
For the Global Competitiveness Index, the IPS test is significant for all the groups as well, but the HT test for upper-middle-income countries (UMI) and high-income non-OECD countries (HnOECD) countries does not reject the null
A causal relationship from the Global Competitiveness Index to GDP growth exists and it works the other way round for all the lags tested apart from the relation Growth Competitiveness Index (GCI)→∆GDP assessed for high-income non-OECD countries and the first lag
Summary
National competitiveness is one of the most central preoccupations for both advanced and developing countries (Porter, 1990) and "many policy makers express serious concerns about it" (Lall, 2001, p.1501). Because the determinants of growth in endogenous growth theory are often simultaneously key drivers in the GCI pillars, we decide to check the following hypothesis: the GDP growth rate can predict the Global Competitiveness Index. We use two variables: the Global Competitiveness Index (GCI) and the GDP PPP annual growth rate.
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