Competitiveness and Economic Growth: A Model with Application to 105 Countries (2006 to 2017)

Abstract

This study aims to establish a link between economic growth and competitiveness based on data from the World Economic Forum WEF WEF outlines the competitiveness of countries in 12 pillars which are grouped into three sub-indices basic requirements efficiency enhancers and innovation and sophistication factors In particular this paper presupposes a model in which efficiency enhancers and factors of innovation and sophistication depend on the evolution of basic requirements in earlier periods The analytical solution suggests that the level of economic activity of countries is a function of the current and lagging growth rate of basic requirements An empirical application of the model is performed for 105 countries using the Pooled Ordinary Least Squares POLS and Fixed Effects FE methods In sum the results show that the level of economic activity of the countries is positively related to the competitiveness indicators besides corroborating the conclusion of the model that the current and lagged rate of the basic factors are the main determinants of the activity level of the countries