A power-based measurement approach to specify macroeconomic competitiveness of countries

The World Economic Forum (Geneva), and the Institute for Management Development (Lausanne) have jointly created, and continue to maintain, a competitiveness rating and ranking for selected countries-the World Competitiveness Index (WCI). The WCI depends on a number of qualitative factors, which, in turn depend on the perception of executives. This paper offers a more robust and objective way of evaluating the competitiveness of countries while replicating the WCI results in a statistically significant manner. The hypothesis is that the long-term competitiveness of a country can be estimated using objective attributes. After validation of results based on this hypothesis versus those of the WCI, the paper explains the relative competitive level of the countries analyzed by using explanatory variables. A sensitivity analysis is used to show how movements, by design or by happenstance, in levels of some of the attributes/indicators may affect a country's overall competitiveness. The paper suggests some important guidelines for policy formulation at the national level in both developed and developing countries as well as in multinational organizations. These can be used for evaluating changes in a given country's competitive status between re- evaluations of the WCI. They can also be used for estimating the competitiveness of countries which have not yet been rated by WCI, or which might not have existed before being considered.