IMD World IMD World Competitiveness Index Competitiveness Index VS VS UnemploymentUnemployment

Lam Ka Man 06015360

Sung Yuk Ling 06007260

Chow Cheuk Yin 06007201

Wan Tai Ho 06009077

Au Chun Lung 06015840

Academic definition of competitiveness

A field of Economic knowledge Analyzes the facts and policies that shape

the ability of a nation Create and maintain an environment that

sustains more value creation for its enterprises and more prosperity for its people

More precisely

Competitiveness analyzes how nations

and enterprises manage the totality of their

competencies to achieve prosperity and

profit

About WCI The ranking represent a success, economic

performance, wealth of a nation

The ability of nations create and maintain a competitive environment

Investigate the global economic situation

WCI and its ranking provide a frame of reference to asses how nations mange their economic future

WCI – World Competitiveness IndexComputed by IMD - International Institute for Management

Development

A leading provider of Executive Education located in Swiss

WCI – World Competitiveness IndexPublished in

WCY - World Competitiveness Yearbook World’s most renowned and comprehensive annual report on the competitiveness of nations

Ranking and analyzing how a nation’s environment creates and sustains the competitiveness of enterprises

WCY - World Competitiveness Yearbook

The yearbook benchmarks the performance

of 55 countries

Based on 323 criteria measuring different facets of competitiveness

Analyzes and ranks the ability of nations

Create and maintain an environment that sustains

the competitiveness of enterprises

Why are these economies are chosen?

All key players in world markets

Impact on the global economy

In 2007, added two new countries (Lithuania and Ukraine)

Methodology

The criteria used to compute the

rankings are grouped into 4 main

factors divided into 20 sub-factors

Methodology

Economic Performance

Government Efficiency

Business Efficiency

Infrastructure

Economic Performance

Domestic economy

International trade

International investment

Employment

Prices

Government Efficiency

Public finance

Fiscal policy

Institutional framework

Business legislation

Societal framework

Business Efficiency

Productivity

Labor market

Finance

Management practices

Attitudes and values

Infrastructure

Basic infrastructure

Technological infrastructure

Scientific infrastructure

Health and environment

Education

The Golden Rules of Competitiveness Rule 1 Create a stable and predictable legislative environment Rule 2 Work on a flexible and resilient economic structure• Rule 3 Invest in traditional and technological infrastructure

The Golden Rules of Competitiveness Rule 4 Promote private savings and domestic

investment Rule 5

Develop aggressiveness on the

international markets as well as

attractiveness for foreign direct

investment

The Golden Rules of Competitiveness Rule 6 Focus on quality, speed and transparency

in government and administration Rule 7

Maintain a relationship between wage

levels, productivity and taxation Rule 8

Preserve the social fabric by reducing wage

disparity and strengthening the middle class

The Golden Rules of Competitiveness Rule 9 Invest heavily in education, especially at

the secondary level, and in the life-long

training of the labor force Rule 10

Balance the economies of proximity and

globality to ensure substantial wealth creation,

while preserving the value systems that citizens

desire

How to use the

World Competitiveness Index?

World Competitiveness Scoreboard Presents the 2007 overall rankings for the

55 economies covered by the WCY The rankings are calculated on the basis

of the 246 ranked criteria included in the

Yearbook

127 Hard and 119 Survey data The countries are ranked from the most to

the least competitive

The relationship between WCI and unemployment

WCI points and unemployment rate

WCI pointsUnemploymen

t rate (%)

USA 100 4.6

SINGAPORE 99.121 1.6

HK 93.541 4.3

LUXEMBERG 92.207 4.2

DENMARK 91.926 4.1

SWITZERLAND 90.432 2.8

ICELAND 88.689 2

NETHERLAND 85.864 3.2

SWEDEN 84.119 4.5

CANADA 83.824 6

AUSTRIA 83.184 4.6

AUSTRALIA 82.387 4.4

NORWAY 81.992 2.5

IRELAND 81.856 4.7

CHINA 79.484 4

GERMANY 78.022 8.3

FINLAND 77.337 6.2

TAIWAN 76.05 3.9

NEW ZEALAND 75.506 3.6

UK 75.447 5.3

ISRAEL 74.321 7.6

ESTONIA 74.303 4.2

MALASYIA 74.091 3.1

JAPAN 72.405 3.9

BELGIUM 71.543 7.2

CHILE 68.567 7

INDIA 63.38 7.2

FRANCE 62.561 7.7

KOREA 61.564 3.2

SPAIN 61.208 8

LITHUAUIA 61.071 3.9

CREZH 59.624 5.1

THAILAND 57.758 1.6

WCI points and unemployment rateSLOVAK 57.722 11.3

HUNGARY 57.627 7.2

GREECE 57.431 7.9

JORDAN 57.132 13.5

COLOMBIA 56.899 11.2

PORTUGAL 55.984 7.9

SOLVENIA 55.172 4.4

BULGARIA 48.737 6.6

ITALY 48.268 5.6

RUSSIA 47.315 5.9

ROMANIA 47.286 6

PHILLIPINES 47.163 7.3

UKRAINE 45.479 2.5

MEXICO 45.305 3.9

TURKEY 45.221 9.2

BRAZIL 44.706 9.3

SOUTH AFRICA 44.479 25.5

ARGENTINA 43.35 8.9

POLAND 42.734 9

CROATIA 38.523 11.8

INDONESIA 37.41 9.7

VENEZUELA 30.954 8.3

France VS Korea

France: rank:29 (62.561)

unemployment rate: 7.7% Korea: rank:30 (61.564)

unemployment rate: 3.2%

France VS Korea

France(7.7) Korea(3.2)

GDP - real growth rate 1.8% (2007 est.) 4.9% (2007 est.)

GDP - per capita (PPP): $33,800 (2007 est.) $24,600 (2007 est.)

Inflation rate (consumer prices):

1.5% (2007 est.) 2.5% (2007)

Investment (gross fixed): 20.7% of GDP (2007 est.) 27.8% of GDP (2007 est.)

Budget: revenues: $1,311 billion expenditures: $1,372 billion

Deficit: 61billion

(2007 est.)

revenues: $269.7 billion expenditures: $256.6 billion

Deficit: 13.1billion

(2007 est.)

Current account balance: -$35.94 billion (2007 est.) $5.95 billion (2007)

WCI & Unemployment rate 2007WCI & Unemployment rate 2007

The relation between WCI and unemployment rate (2007 calculation) H0: β1=0

HA: β1≠0Rejection rule: reject H0 if |t| > tc

Let α=0.05degree of freedom =55-1-1tc: t0.025, 53≈ 2.0003

From Eview, |t|=4.37584

As |t| > tc, we reject H0. Therefore we conclude that β1 is significantly different form 0.

The relation between WCI and unemployment rate

After the calculation, we can conclude that WCI has a weak negative relationship with UNEMPLOYMENT RATE.

Why the relationship between WCI and unemployment rate are so weak? Only a few components of WCI are directly

reflected the Employment/Labor Market.

Why the relationship between WCI and unemployment rate are so weak? (con’t) The goals of WCI is not measuring the labor

market . It ignored many factors which affecting the employment.

- The law of protesting labor. - The market power of union. - The welfare of no job workers. - The tradition of the country

The law of protesting labor Example: minimum wages. Theoretically, By raising the wage of

unskilled and inexperienced workers above the equilibrium level, minimum wage laws raise the quantity of labor supplied and reduce the quantity demanded. The resulting excess supply of labor represents unemployment.

The market power of union When the unions are having enough market

power. When unions push the wages in unionized industries above the equilibrium level, they create an excess supply of labor.

On the other hand, unions can bargain with the company and government. It result the firm can not fire the labor easily. (France)

The welfare for unemployed workers

the Frictional unemployment.

Unemployment insurance is a government policy that, while protesting workers’ incomes

the amount of search unemployment.

The tradition of the country For example, Japan’s tradition is lifetime

employment Most large firms offer guaranteed lifetime

employment. Retirement age is 55.

Therefore, the Japan unemployment rate keeps in low level.

WCI has a negative relationship with UNEMPLOYMENT RATE The WCI ranking represent a success, economic

performance, wealth of a nation. It can Implied that the higher WCI rank the higher output (GDP) lower unemployment rate

WCI has a negative relationship with UNEMPLOYMENT RATE Those factors are affecting the output level

and GDP level Such as the Domestic Economy, Fiscal

Policy, Productivity & Efficiency. Some factors also affect the quality of labor

indirectly Such as Basic Technological, Health &

Environment and Education.

WCI has a negative relationship with UNEMPLOYMENT RATE

We can conclude that WCI can explain the unemployment rate. But the relation is not too close.