Ibus 410 Midterm 2

Country Competitiveness and Institutions:

1. What does country competitiveness mean? The extent to which a country is capable of generating more wealth than its competitors do in the world markets How is it related to but different from the comparative advantage of a country? it measures and compares the effectiveness of countries in providing firms with an environment that sustains the domestic and international competitiveness of those firms. It centers on productivity, value of output produced by a unit of labor or capital, A determinant in long-term standard of living. Comparative advantage is based on factor endowment conditions ( labor, land, natural resources, and capital. It can influence the level of competitiveness in industries but advantage in factors alone is not sufficient in determining its international competitiveness. What are key country-level factors that determine the competitiveness of a country? pg 161

* Institutional system-political/social stability, well-constructed and enforced legal system, and sound macroeconomic conditions.

* Infrastructure- transport, communications, public utility networks, health care, education, and job training systems.

* Macroeconomic soundness- the extent to which an economy has been equipped with the economic prerequisites for sustained development and growth. It concerns both economic stability and economic growth. This could be reflected with a low inflation rate.

* Stability and efficiency of the financial system, effective taxation and stable government finance, balanced growth of investment and consumption, and sustainable pattern of trade.

* Science, education, and innovation- central to the process of raising productivity and thereby improving country competitiveness. Increasing the range of choices with respect to new products and production processes, technological progress raises the potential for economic expansion and fosters human and economic...