international competitiveness

Question 1

what is the definition of international competitiveness?

Answer 1

the ability of a nation to compete successfully overseas and to sustain improvements in living standards and output

Question 2

why is international competitiveness important?

Answer 2

to maintain levels of growth, increase living standards

Question 3

what are the factors that affect whether a country is internationally competitive or not?

Answer 3

price competitiveness of a nations goods and services
non price competitiveness
ability to affect factors of production

Question 4

how does price competitiveness of a nations goods and services affect whether a country is internationally competitive?

Answer 4

when it comes to selling goods and services overseas, if you arent price competitive relative to another country then that country will struggle to sell and compete

Question 5

how does non price competitiveness affect whether a nation is price competitive?

Answer 5

• in nations where price competitiveness is lacking and unit labour costs are quite high
• this translates to higher prices for consumers
• if that nation can compete on non price factors such as branding, high service quality, reliability, innovation then it can be quite competitive overseas

Question 6

how does a countries ability to affect factors of production affect whether a country is price competitive?

Answer 6

• whether a country can attract foreign direct investment/ factors of production
• attracting high profile entrepreneurs, businesses, capital

Question 7

how can you prove whether a country is becoming more price competitive?

Answer 7

unit labour costs
look at terms of trade
global competitiveness index

Question 8

how do you calculate unit labour costs?

Answer 8

total labour costs/(divided by) output produced

Question 9

what is the global competitive index and how does it prove whether a country is price competitive

Answer 9

measure of price competitiveness
recognises that price competitiveness is determined by many factors such as infrastructure, tax levels
- factors are given a rating to get an overall index figure of how competitive that nation is
- as a result of policies that can improve competitiveness, a nation will improve rank on the global competitive index

Question 10

how can terms of trade be used to prove whether a country is price competiitve

Answer 10

the greater the number for TOT, the better the terms of trade position but worse in terms of price competitivenes

Question 11

what determines unit labour costs?

Answer 11

productivity
skills or workers
strict regulation

Question 12

how does high productivity drive down labour costs?

Answer 12

increased output when the same number of hours are worked
the firm can raise wages without passing the cost onto consumers

Question 13

how does the skills of workers determine unit labour costs?

Answer 13

could lead to higher levels of output without increasing costs

Question 14

how do strict regulations determine unit labour costs?

Answer 14

strict regulations such as high minimum wages would increase unit labour costs which may decrease price competitiveness

Question 15

what are the factors that determine international competitiveness?

Answer 15

unit labour costs
labour flexibility
labour skills
tax regimes
innovation
infrastructure
regulation
economic stability

Question 16

how does labour flexibility determine international competitiveness?

Answer 16

• how easily can workers move jobs and what are the flexibility in terms of skills that the labour force has, are working arrangements flexible? do workers like work part time
• the more flexible the labour force is, the more a nation is likely to be more internationally competitive
• may attract FDI

Question 17

how do tax regimes affect international competitiveness?

Answer 17

• e.g corporation tax which can stipulate technology and innovation, new capital
• useful for increased efficiency
• improve price competitiveness
• also improve non price competitiveness aswell
• if corporation taxes are low, this will attract foreign firms to a nation
• also if income taxes are low its easier to attract workers from abroad

Question 18

how does infrastructure affect international competitiveness?

Answer 18

• can boost efficiency of domestic firms and with strong infrastructure
  moving goods and services around the country and internationally becomes easier, quicker, cheaper
  
  • may translate into lower prices
  • attract FDI

Question 19

how does regulation affect international competitiveness?

Answer 19

• enforces costs and makes it more difficult and elongates the process of doing business
  
  • increased deregulation may lead to lower prices and higher FDI

Question 20

how does economic stability affect international competitiveness?

Answer 20

the more stable the economy is, the easier it is to attract FDI and foreign factors of production

Question 21

what supply side policies can be used to increase international competitiveness?

Answer 21

govt spending on infrastructure
tax incentives
deregulation
govt spending on education

Question 22

how can govt spending on infrastructure increase international competitiveness?

Answer 22

• improve efficiency of doing business
• easier/quicker/cheaper to move goods and services which reduce costs
• improve efficiency
• reduce prices
• increase price competitiveness

Question 23

how can tax incentives be used to increase international competitiveness?

Answer 23

• lower corporation tax increases retained profits of businesses
• they may use this profit to reinvest
• e.g more spending on technology, capital, innovation, research and development
• increase efficiency
• lower cost of p
• lower prices
• improve price and non price competitiveness
• attract FDI
• or through tax allowances of investment which is when the govt says up to a given threshold, if a business was to ring-fence its profits for investment purposes, they wont be taxed on that profit → incentive for businesses to put more money aside for investment

Question 24

how can gov spending on education be used to increase international competitiveness?

Answer 24

• if productivity is holding a country back then govt spending on education can lead to higher productivity
• e.g curriculum reform
• spending on apprenticeship schemes
• decrease unit labour costs
• improve competitiveness