Determinants of National Economies’ Competitiveness Based on Per Capita Income

Abstract

Currently, economic theory is highly interested in the definition and the measurement of competitiveness as is the case of empirical studies that diverged about issues related to determination, specification, and estimation techniques. The present article aims to propose a synthetic indicator for national competitiveness through empirical analysis. For data collected from World Economic Forum report (2014), a principle component analysis has been conducted in order to identify competitiveness’ key explanatory variables. The Partial Least Squares (PLS) estimation shows that the importance of the variables in the construction of the competitiveness index differs according to the level of development of the country. These results indicate to policy makers the most effective instrumental variables that could affect their national economies’ to make improvements.