“Is it Worthwhile to Study the Competitiveness of Countries?”

Sung Ko Li, Hong Kong Baptist University

Chun Kei Tsang, Hong Kong Baptist University

Researchers of competitiveness tend to believe that higher competitiveness will lead to higher growth rate in the long run. Such relation is crucial to the usefulness of competitiveness indices but has not been studied seriously in the literature. This paper found evidence of the two-way causality between competitiveness and economic growth of countries in the world. We further found evidence that the causality from economic growth to competitiveness breaks down in developing countries. The result suggests competitiveness studies in developed countries fit in the scope of endogenous growth models, while competitiveness studies in developing countries fit in the scope of exogenous growth models. This can be explained by the effectiveness of their resource allocation. A more effective resource allocation country is more likely to have a growth pattern of endogenous growth models.