Institutional Learning and Change Initiative

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Abstract:

A key question in development economics has been why some countries grow faster than others. In recent years, the role of the government has come to the center of the discussion, giving rise to the notion of ?national competitiveness.? The debate about national competitiveness has revolved around two questions: first, whether the notion of a country's competitiveness is meaningful; and second, whether the government should do anything to enhance it. This brief addresses these two issues. There are several reasons why competitiveness has recently attracted a great deal of attention. First is the increasing importance of international trade in the world economy, leading some to believe that a country's living standards depend on its capacity to export. Second is the greater mobility of capital across countries. Third is the enormous difference in performance of countries in terms of trade and economic growth, with East Asia outperforming all other regions. Fourth is the increasing popularity of indices of national competitiveness, by which countries are ranked and compared with each other. Finally, the forces of globalization and technological progress have accentuated competition among both domestic and foreign firms. For instance, in recent years, the challenge of the People's Republic of China has heightened the need to be competitive in order to survive. In this new environment, the key resource is knowledge, which is changing the nature of comparative advantage (Yusuf 2002).

Notes:

http://www.adb.org/Documents/EDRC/Policy_Briefs/PB018.pdf