5
Sep

Kuwait, a small country in the Persian Gulf, holds the sixth spot on the global GDP per capita ranking, with an average per capita income of over US$ 69,000 in 2015, adjusted at the purchasing power parity. At the same time, it ranked only 34th in the World Economic Forum’s 2015-2016 Global Competitiveness Index (GCI).

New Zealand, another relatively small country both in size and population, has a per capita wealth which is roughly only half that of Kuwait — a little over US$ 34,000 at the purchasing power parity, 35th place in the world. Nonetheless, New Zealand scored visibly higher in competitiveness, ranking 16th in the GCI.

Clearly, the two economies and their structures are not directly comparable. Kuwait’s heavy dependence on natural resource revenues (over 90 per cent of exports) provide for such a lush per capita value, while New Zealand’s GDP is stimulated primarily by services that dominate the local economy, at over 69 per cent. Competitiveness, both as a notion and an index, arguably transcends countries’ idiosyncrasies in relation to their economies’ compositions. Competitiveness is ultimately reliant on a set of universal and comparable parameters. Therefore, a logical question arises: why does this mismatch and others of similar nature happen?

Our tradition of measuring and understanding development and related components such as competitiveness has been dominated by the economic agenda. Conventionally, GDP and its derivatives have been employed to describe and substantiate changes in development. Often, they have revealed clear and important trends that can be useful when approaching policy implementation. For example, the World Economic Forum highlights that GDP per capita is highly correlated with GCI in large cross-county comparison.

Our own analysis has confirmed that GDP explains 69 per cent of the variation in GCI scores across 146 countries when both indexes are taken as averages for three years from 2014 to 2016 and an exponential model is used. At the same time, however, and exemplified by the above comparison between New Zealand and Kuwait, GDP per capita might not necessarily capture the full complexity of the nature of competitiveness at the macro level. Read more…

Published on Sept. 1st in https://www.weforum.org
Mark Esposito

Fellow, Judge Business School, University of Cambridge

Artem Altukhov, MIR Alumnus 2017

Alejandro Pereda Shulguin, MIR Alumnus 2017

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