How Do National Economic Competitiveness Indices View Human Capital?

Abstract

Economic competitiveness is at the top of national, regional and global political and economic agendas. Several countries in all regions of the world have established policies and institutions devoted to economic competitiveness, including in developing and transition countries. This leads to the question of how to define national economic competitiveness and, as a logical consequence, how to measure it. This article provides a critical analysis of two major global indices measuring national economic competitiveness, the World Economic Forum (WEF) and the International Institute for Management Development (IMD), with a special focus on the index published by the WEF due to its broader global coverage. The article shows that human capital has been given relatively little explicit recognition, despite the large weight of human capital in the WEF index. This article asserts through simulations based on WEF data that countries performing poorly in national economic competitiveness rankings can improve their standings significantly by focusing reform efforts on raising quality of education and on expanding access to education and training. The simulations also show that the potential improvements in national economic competitiveness are unequally distributed across the globe, and that in terms of national economic competitiveness, developing and transition countries stand to gain relatively most from improving their education and training systems compared to developed nations. Suggestions for improving measurements of education and training in the WEF index conclude the article and it is shown that educationalists can help refocus policy discussions on how to improve education and training systems through discussions on substance.