global competitiveness index (gci) vs unemployment rate
DESCRIPTION
Global Competitiveness Index (GCI) vs Unemployment Rate. CHONG Ngok Ki, Nathan07000820 PENG Fei, Rick06050654 NG Sze Ho, Stephen05014778 ZHANG Yifei, Kelvin05051584. Content. Introduction of GCI Stage of the economy Introduction to 3 sub-sections and relative ranking - PowerPoint PPT PresentationTRANSCRIPT
Global Competitiveness Index (GCI)vs Unemployment Rate
CHONG Ngok Ki, Nathan 07000820
PENG Fei, Rick 06050654
NG Sze Ho, Stephen 05014778
ZHANG Yifei, Kelvin 05051584
Content Introduction of GCI
Stage of the economy
Introduction to 3 sub-sections and relative ranking Classification of 12 pillars
Key competitive advantages of Hong Kong and China & Suggestions for achieving higher GCI
Comparison between GCI (overall) and unemployment rate <Regression>
Introduction to GCI
The Global Competitiveness Index measures
the set of institutions,
policies
factors that set the sustainable current and medium-term levels of economic prosperity.”
Different Stages of Economy
Weights of the three main groups of pillars at each stage of development
Criteria of deciding the stages
Percent of specific types of goods allocated in total export
Level of GDP per capita at market exchange rates
Basic Requirement
Institution
Divided into two major parts
Public institutions
Private Institution
Public institutions
Property rights
Public trust of politicians
Wastefulness of government spending
Reliability of police services
Private institutions Ethical behavior of firms
Corporate Governance
Protection of minority shareholders’ interests
Strength of auditing and accounting standards
Infrastructure
Transportation System Telecommunication System Electricity Supply
Transportation System
Transport for goods, people Efficiency of roads, railways, ports and airports will
be taken into account
Get the good to the market in a timely manner Facilitate movement of workers
Telecommunication System
Rapid, free flow of information (fast) Solid and extensive network (board & stable)
Enhance wiser decision making, by taking all relevant information into account
Electricity Supply
Electricity supply in a reasonable price Free of interruption and shortages
Business and factories can run smoothly
Marcoeconomy
Relative passive factor Stable Marcoeconomy alone not able to
increase productivity Only when macroeconomy disarray harms
productivity (in a reverse way)
Example
Inflation too high Government spending too high (deficit)
Bad economic environment
Lower living standard Motivation
Health and primary education
Impact of health on productivity
Importance of basic education
Impact of health on productivity
Ill worker cannot function in full potential Business operation in a low efficiency
Productivity decreases enhances the country less competitive
Importance of basic education
Basic education will increase efficiency of individuals
Much easier to be adapted to new technique and technology
Administrative staff requires basic education
Efficiency Enhancer
What is competitiveness?
The most intuitive definition of competitiveness is a country’s share of world markets for its products.
In fact, it is still often said that lower wages or devaluation “make a nation more competitive.”
What is competitiveness?
The most intuitive definition of competitiveness is a country’s share of world markets for its products.
Prosperity is determined by the productivity of an economy
is measured by the value of goods and services produced per unit of the nation’s human, capital, and natural resources.
Value of a nation’s products and services, measuredby the prices they can command in open markets
Efficiency with which they can be produced
Countries begin to develop more Efficient production processes and increase product Quality.
Production
F(K,L,Tech)
Market
Goods Market Efficiency
Labor Market Efficiency
Financial Market Sophistication
Higher Education and Training
Technological readiness Market Size
Higher Education and Training: Move up the value chain
Adapt rapidly to changing the environment
Measurement Secondary and Tertiary enrollment rates
Quality of education
Vocational and continuous on-the job training
Technological Readiness :Ability to adopt existing technologies to enhance the productivity
Increasing relative importance of technology adoption to national competitiveness
Goods Market Efficiency:produce the right mix of products and services given supply-and-demand conditions
Healthy domestic and foreign market competition
best possible environment for the exchange of goods
demand conditions such as customer orientation and buyer sophistication
Labor Market Efficiency:
Workers are allocated to their most efficient use in the economy
Ensure a clear relationship between worker incentives and their efforts
Workers are allocated appropriately and provided with incentives to give their best effort in their jobs
Labor markets must have the flexibility to shift workers from one economic activity to another quickly
Allow for wage fluctuations without much social disruption
Financial Market Sophistication:
Channels resources to the best entrepreneurs or investment projects rather than to the politically connected
Develop products and methods so that small innovators with good ideas can implement them
Provide risk capital and loans and be trustworthy and transparent
Sophisticated financial markets that can make capital available for private-sector investment from such sources as loans from a sound banking sector, well- regulated securities exchanges, and venture capital
Market Size:
The size of the market affects productivity because large markets allow firms to exploit economies of scale
International trade as a substitute for domestic demand in determining the size of the market for the firms of a country
Innovation and Sophistication factors
Business sophistication Business sophistication is conducive to higher efficiency in the
production of goods and services. This leads to increased productivity, thus enhancing a nation’s competitiveness.
A. Networks and supporting industries Local supplier quantity Local supplier quality
B. Sophistication of firms’ operations and strategy Production process sophistication Extent of marketing Control of international distribution Nature of competitive advantage Value-chain presence
Innovation Basic requirements and efficiency enhancers like building infrastructure and
improving the human capital eventually seem to run into diminishing returns. In the long run, therefore, when all the other factors run into diminishing returns, standards of living can be expanded only by technological innovation.
Quality of scientific research institutions
Company spending on research and development
University/industry research collaboration
Government procurement of advanced technology products
Availability of scientists and engineers
Utility patents (hard data)
Intellectual property protection
Capacity for innovation
Key competitive advantages ofHong Kong and China
Suggestions for achieving higher GCI
Ranking in different pillars (Hong Kong)
Pillars Ranking Sub section ranking
(1) Institutions 12 5
(1) Infrastructure 5
(1) Macroeconomic stability 5
(1) Health and primary education 28
(2) Higher education and training 26 3
(2) Goods market efficiency 1
(2) Labor market efficiency 4
(2) Financial market sophistication
1
(2) Technological readiness 6
(2) Market Size 27
(3) Business sophistication 15 21
(3) Innovation 23
Overall: 12Overall: 12
Key competitive advantages and suggestions for Hong Kong
Advantages *Financial market sophistication *Goods market efficiency Labor market efficiency Infrastructure Macroeconomic stability
Suggestions Increasing enrollment rates at all levels of the
educational ladder Allocating more resources on R&D / Innovations
* Rank No.1 around he world
Ranking in different pillars (China)
Pillars Ranking Sub section ranking
(1) Institutions 77 44
(1) Infrastructure 52
(1) Macroeconomic stability 7
(1) Health and primary education 61
(2) Higher education and training 78 45
(2) Goods market efficiency 58
(2) Labor market efficiency 55
(2) Financial market sophistication
118
(2) Technological readiness 73
(2) Market Size 2
(3) Business sophistication 57 50
(3) Innovation 38
Overall: 34Overall: 34
Key competitive advantages and suggestions for China
Advantages Domestic and *foreign market size Macroeconomic stability
Suggestions Optimizing the financial markets Boosting the higher education and training Improving the quality of public and private institutions
* Rank No.1 around he world
Statistical Analysis
By SAS Software
Statistics Methodology Plot and deal with the raw data Check assumptions: - Normality assumption - Random assumption Detection of outliers Run regression with the preprocessed data Explanation of the results
Descriptive Statistics
Number of countries: 89
Variable Mean Std Dev Min Max
Unemployment rate 8.1% 6.97% 0.7% 48%
GCI 4.29 0.69 3.07 5.77
Simple Linear Regression
Model: (For any country)
Unemployment = f (GCI, ß) + є
Where ß is a parameter vector, and є is uncorrelated random error that follows the normal distribution.
Unemployment Rate VS GCI
Regression Results Summary
R-Square 0.1580
Variable Parameter Estimates
Standard Error
95% Confidence Limits
ߺ 25.20143 4.28689 (16.68077, 33.72208)
ß¹ -3.99042 0.98756 (-5.95331,
-2.02754)
Normal PP Plot of Residual
Statistics Methodology Plot and deal with the raw data Check assumptions: - Normality assumption - Random assumption Detection of outliers Run regression with the preprocessed data Explanation of the results
Residual VS GCI
Residual VS Predicted
Statistics Methodology Plot and deal with the raw data Check assumptions: - Normality assumption - Random assumption Detection of outliers Run regression with the preprocessed data Explanation of the results
Unemployment Rate VS GCI
Statistics Methodology Plot and deal with the raw data Check assumptions: - Normality assumption - Random assumption Detection of outliers Run regression with the preprocessed data Explanation of the results
Outliers by Hat Matrix
Country/Region
Unemployment
Rate
GCI
Senegal 48% 3.33
Macedonia 35% 3.45
South Africa 24.2% 4.44
Statistics Methodology Plot and deal with the raw data Check assumptions: - Normality assumption - Random assumption Detection of outliers Run regression with the preprocessed data Explanation of the results
Revised Sample
Regression Results Summary
R-Square 0.182
Variable Parameter Estimates
Standard Error
ߺ 18.711 2.713
ß¹ -2.689 0.622
Regression Results Summary
Intuition regarding to the slope ߹ change from -3.99042 to -2.689 ߺ change from 25.20143 to 18.711
Final Model
Unemployment Rate
= 18.711 – 2.689 * GCI
Remark: Negative Relation Increase on GCI by 1 unit, the
Unemployment Rate will decrease up to 2.7 percentage.
Further Study Possibility
Introduce high order variable (Polynomial)
Times series model replace regression model
- Autocorrelation among the GCI and unemployment rate is strong.
- Suitable Models could be:
ARMA or ARIMA model