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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 21: Methodology of the empirical study

Timo J. Hämäläinen


1 NATURE OF COMPETITIVENESS INDICES The independent variables of our study consist of seven competitiveness indices which measure the adjustment of the industrial societies to the new socio-economic paradigm. The indices correspond to the seven factors of our competitiveness and growth framework: productive resources, technology, organizational efficiency, product market characteristics, international business activities, institutional framework and the role of government. Each of the seven indices, in turn, include several competitiveness indicators. We have tried to avoid indicators which would be close proxies to our performance measures, such as the total factor productivity (TFP) growth rate. Finally, the mean of the seven competitiveness indices for a particular country and time period forms an ‘overall competitiveness index’ which is used to test our theoretical framework as a whole. The different competitiveness indices and indicators are presented in the benchmarking tables of the Appendices. Taken together they provide an overall picture of the adjustment process and success of industrialized nations. They also give us a database for testing our theoretical framework. In the next section we describe the different types of indicators that were used to build the seven competitiveness indices and provide theoretical arguments behind their selection. The subsequent section discusses the data sources and the method of constructing the competitiveness indices. Productive resources. In the new technoeconomic paradigm, international competitiveness and economic growth are increasingly based on intangible investments and created and specialized resources (see Chapter 7). The key resources of the new paradigm are information and knowledge. Our ‘productive resources’...

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