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National Competitiveness and Economic Growth

The Changing Determinants of Economic Performance in the World Economy

Timo J. Hämäläinen

The current paradigm shift in the world economy is challenging the traditional competitiveness and growth theories with their few explanatory variables. This book offers a more holistic framework to synthesise the key findings of the various branches of competitiveness and growth research. The author illustrates this framework with a new long wave theory of socio-economic development. This theory emphasises the competitiveness and growth benefits of rapid structural adjustment in the rapidly changing techno-economic environment. Based on thorough analysis the author argues that both markets and governments have become less efficient due to the current transformation of the world economy. His empirical data from 22 OECD countries in the 1980s and 1990s illustrates that efficiency and growth-oriented governments have significantly contributed to their countries’ economic success.
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Chapter 20: Economic performance of industrialized countries

Timo J. Hämäläinen


At the beginning of this study, we pointed out that the performance measures of our empirical research would be limited to the purely economic aspects of standard of living and national welfare. The dependent variables of our empirical study measure economic competitiveness and growth across 22 industrialized countries. The variables related to economic growth (usually GDP-related) are relatively well-established in the literature but there is much less agreement on the appropriate measures of national competitiveness. In our statistical analysis we use real GDP growth and GDP/capita growth (PPP-adjusted) figures as our primary measures of economic growth. In addition we use GDP/capita level as a measure of long-term cumulative economic growth. National competitive performance, in turn, is typically measured with variables that describe a country’s international trade position. An often used indicator is the revealed competitive advantage (RCA) which measures a nation’s share in all export markets (Balassa 1965). However we use the growth of national export market share which is more closely related to each nation’s own export markets than the RCA indicator. Another competitiveness indicator relates to a country’s specialization in high-technology exports. The globalization of markets and increasing competition from the newly industrialized countries in traditional sectors have put growing pressure on industrialized countries to adjust their economic structures towards more technology-intensive sectors. Many high-technology sectors still offer economic rents that can maintain the high wages and standards of living in industrialized countries. This chapter lays out our data on the dependent variables and discusses the recent differences...

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