How Does International Competitiveness Affect Economic Development? A Two-Phase Hypothesis

Abstract

This paper analyses the impact of international competitiveness on economic development, based on the World Economic Forum Global Competitiveness Index (GCI) and GDP/capita of 125 countries during the period 2007-2010. The results reveal two phases of the evolution of competitiveness. When GCI < 4.5 (on 1-7 scale), any improvement of a country’s competitiveness affects current development more than future development. When a country’s GCI rises above 4.5, further improvements of competitiveness will affect future development more than current development. The 4.5 competitiveness threshold is remarkably stable throughout analyzed period.