Finance Research Seminar: Beyond Competitiveness: Is Productivity Everything?

We would like to invite all enthusiasts and finance researchers to the November 2023 Kozminski University Finance Research Seminar: Beyond Competitiveness: Is Productivity Everything?

When? Thursday, 30 November 2023, 5:15 PM (CET)

Online event - Microsoft Teams (MS Teams link will be sent following registration below)

ABSTRACT:

This study extends the discussion on the ongoing controversies over the concept of competitiveness on the macroeconomic level by empirically assessing whether productivity is a better measure than competitiveness in terms of ranking countries’ relative positions on the global stage. Inspired by the World Economic Forum’s (WEF) Global Competitiveness Index (GCI) and numerous related works, this study provides a new perspective to this ongoing puzzle. To that end, we examine the potential use of productivity as conceptually less controversial and methodologically more robust metric for cross-country comparison of economic performance. Our empirical results seem to suggest three possible contributions to the ongoing call of refining the approaches to country ranking. First, the ranking of countries based on normalized labor productivity yield the same results as those based on the WEF’s GCI. Second, the correlation between all the scores of the 12 sub-pillars of the GCI, as well as the overall GCI score and productivity yield strikingly similar results. Third, based on a panel dataset for 68 countries over the years 2007-2019, our results obtained from a panel VAR (PVAR) model indicate that productivity has a stronger prediction power for both real GDP growth, as well as for the inequality-adjusted GDP growth than the GCI. These results seem to suggest that the use of productivity may eventually be conceptually less controversial and methodologically more robust global metric for country rankings. Finally, given the non-linearity nature of competitiveness and productivity, we regressed productivity on GCI and used the residuals from the regression to explore if some key macroeconomic policy variables could explain the gap. The results seem to suggest that higher values of rule of law, property rights, economic freedom and political stability explain why some economies are positioned higher in their level of productivity compared to their positions in the GCI ranking.