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 ...view middle of the document...
Technological deficiencies are a major reason for low incomes in developing countries.
* Must be a close interface between basic scientists and R&D managers in the corporate world
* Must be a strong support for developing intellectual property rights in order to encourage enterprises
* The economy must be flexible enough to support the rapid adoption and diffusion of new technologies
* Internalization-associate with country competiveness refers to the extent to which the country participates in international trade and investment. Including exports, exchange rate systems, foreign investment, foreign exchange reserves, and openness of the economy. Openness refers to extent to which its national economy is liked to world economies through the flow of resources, goods, services, people, technologies, information, and exchange rate.
2. What are the key institutional conditions for the international competitiveness of a country?
* Political stability- the most basic requirement. Countries in civil wars and lawlessness due to ethnic or civil conflicts see their economies regress because few people are willing to invest in such a place.
* Market oriented system-efficiency in a countrys productive activities requires a political and economic system that allows its citizens to retain a large portion of the wealth they accumulate. IE. Rewarding effience and innovative producers Soviet Union and China failed to reward efficient and innovative producers. This led to stagnation because there was no incentive to improve.
* Functioning administrative system- guards against rampant official abuse and corruption.
* Protection of contractual and consumer rights- against fraud. Without a regulatory regime that detects and punishes fraud, the people won’t have faith to purchase anything.
* Rule of law-enforcing laws guarding against official abuse and corruption, and protecting contractual and consumer rights by not allowing judges to make independent decisions on this matter.
Why are each of them important? In particular, what are the key advantages of a market- oriented economic system in sustaining economic development and growth over a centrally- planned system such as the type that the former Soviet Union and China used to have?
3. How can both inadequate regulations and excessive regulations hinder economic growth and development, especially in less developed countries (LDCs)? In order to have country competiveness, a country needs to have a functioning administrative system, protection of consumers against fraud, rule of law insuring that government officials don’t partake in corruption, a functioning market economy system, and political stability. All of these need to work together in order for economic growth to occur. If there are inadequate regulations people will take advantage of the system and fraud and corruption will occur. However if there are too many...