Although GCI index is one of the most acceptable and recognized indicator of national competitiveness in the literature, it is not exempt of criticism. Lall (2001) indicated on many methodological, quantitative and analytical problem and dubbed the index "misleading". Van Sel indicated on two most serious problems with GCI (Van Stel et al, 2005). The index is not stable in short time even for developed economies ( USA have a 6th rank in 2007, and 1first in 2008), what questioned his standard. Moreover, GCI is not succeeded in predicting short and long-term economic growth, because it combines so many other variables such as entrepreneurial activity (Xia et al, s.47). However, the authors of newest Global Competitiveness Report state that GCI represent "the concept of competitiveness thus involves static and dynamic competitiveness and .... can explain an economy growth potential" (Global Competitiveness Report 2015-2014, p. 4).What is the true GCI validity for economic growth prediction?
In my opinion the role of GCI is not really to predict economic growth, but rather to indicate overall competitiveness of a country from entrepreneurial perspective. In this sense I put it together with the Ease of Doing Business report, even if highliting much different issues. I understand the expectation that GCI would explain at least some of economic growth, but I am rather skeptical about such hopes (also, growth potential and actual growth are not necessarily that much correlated...). Thus, the true validity of GCI for growth prediction is an empirical one.
Finally, I would bet that among this kind of projects the one with higher chances to explain and predict economic growth would be the Observatory of Economic Complexity by the MIT (http://atlas.media.mit.edu/), which is by the way also criticable for the instability etc.
With best regards from Cracow
Piotr
PURPOSE OF GLOBAL COMPETITIVE INDEX: The purpose of GCI report is to provide a general picture & report of the status of each country or group of countries in terms of "competitiveness" so that decision makers could cut cost on country analysis. It is not an indicator of growth nor is it a tool meant for growth prediction or forecasting. It is intended to be used as a summary of current market condition and potential. The following pillars are used:
1. Institutions
2. Infrastructures
3. Macroeconomic environment
4. Health and primary education
5. Higher education and training
6. Goods market efficiency
7. Labor market efficiency
8. Financial market development
9. Technological readiness
10. Market size
11. Business sophistication
12. Innovation
These indicators answer the question: Is this country good for our firm to enter? It does not answer the question "whether this country will growth". That is not the intended use of GCI Report. The report helps classify countries into three market categories: (i) factor driven, (ii) efficiency driven and (iii) innovation driven markets. This classification is useful in decision management. If Firm A wants to produce widget at low cost using low technology, where should it go? GCI points to countries that are factor driven markets. This saves time, money and resources in the decision making process.
If we want the answer to the question: What is the prospect of economic growth of country X? This is the job of the World Bank and the IMF. In fact, the IMF had already answered this question and predicted the growth for all its member countries up to the year 2019. See attached. Whether that prediction is valid or reliable, we could debate---and that would be a legitimate debate.
VALIDITY: Validity is defined as precision, i.e. matching the observed value and the theoretical value. Both country classification and stages of development classified by WEF agrees with that classified by the World Bank, IMF, and in the field, i.e. the actual countries themselves. see two figures attached. See also pp. 8 - 11. WEF Report.
RELIABILITY: Reliability is defined as consistent result produced by independent and subsequent studies. Compare WEF's report to that of the classification made by the IMF and World Bank---are there any inconsistencies? This is also a moot issue. See http://data.worldbank.org/ AND http://www.imf.org/external/ns/cs.aspx?id=28.
REFERENCES: See attached the latest issue of WEF Report on GCI.
http://www.weforum.org/reports/global-competitiveness-report-2014-2015
http://data.worldbank.org/
http://www.imf.org/external/ns/cs.aspx?id=28
Refer to
http://www.it-tallaght.ie/student_careers_gci_student_guide.
- Badges
- Science topic
- Similar topics
- Econ
- Innovation Economics