erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

A Power-Based Measurement Approach to Specify Macroeconomic Competitiveness of Countries

Burç Ulengin (Istanbul Technical University)
Füsün Ulengin (Istanbul Technical University)

Abstract

The World Economic Forum (Geneva), and the Institute for Management Development (Lausanne) have jointly created and continue to maintain a competitiveness rating and ranking for selected countries - the World Competitiveness Index, (WCI). The WCI depends on a number of qualitative factors, which in turn depend on the perception of executives. This paper offers a more robust and objective way of evaluating the competitiveness of countries while replicating the WCI results in a statistically significant manner. The hypothesis of this paper is that the long-term competitiveness of a country can be estimated using objective attributes. After validation of results based on this hypothesis against those of the WCI, the paper explains the relative competitive level of the countries so analyzed by using explanatory variables. This avoids the subjectivity, the bias and the relative opaqueness inherent in expert opinion surveys. It better reveals the power of the attributes/indicators used. A sensitivity analysis is used to show how movements, by design or by happenstance, in levels of some of the attributes/indicators may affect a country's overall competitiveness. Thus the paper suggests some important guidelines for policy formulation at the national level in both developed and developing countries as well as in multinational organizations. The underlying methodology is easily accomplished, noninvasive, and allows for fail-safe pre-testing of policy modifications. It is cost effective and quick. It can be used for evaluating changes in a given country's competitive status in between re-evaluations of the WCI. It can be used for estimating the competitiveness of those countries, which have not been yet rated by WCI, or countries, which might not even exist before being considered. Because of this development WCI values will not have to be updated as often. Hence a cost reduction. Lastly, this capability allows one to pretest the impact of contemplated or potential national breakups on both the mother or the remnant country and on the contemplated entity and it can be used to estimate the WCI for those existing countries which have yet to be so rated.

Economic Research Center
Middle East Technical University
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e-mail: metuerc@metu.edu.tr