Investigacion De Mercado

CHAPTER 1.1

The Growth Competitiveness Index: Analyzing Key Underpinnings of Sustained Economic Growth
JENNIFER BLANKE, World Economic Forum FIONA PAUA, World Economic Forum XAVIER SALA-I-MARTIN, Columbia University and Universitat Pompeu Fabra

Few things matter more for the welfare of a country’s citizens than the aggregate growth rate of the economy. For rich countries, positive growthrates tend to mean higher wages, larger profits, more employment, and expanded business opportunities. For poor countries, positive growth rates tend to lift people out of poverty as their incomes tend to rise along with average GDP. Indeed, a 1 percent increase in per capita GDP tends to be associated with a 1 percent increase in the incomes of the poorest 20 percent of the population.1 Moreover,positive growth rates in the developing world tend to be associated with improvements in other dimensions: reductions in infant mortality, longer life expectancy, increased access to water and sanitation, expanded education, reduced female discrimination, declines in child labor (especially child prostitution and child soldiers), and improvement in freedom, civil liberties, and democracy.Thus, theaggregate growth rate of a nation is important, perhaps one of the most important factors affecting human welfare. Despite its enormous importance, the determinants of the growth rate of a country remain one of economics’ biggest mysteries.This is true even though the greatest economic minds of the last two centuries have tried hard to explain what can be done to increase a country’s growth rate.Adam Smith thought that specialization and the division of labor was the engine of growth.The great classical economists of the 19th century (such as Thomas Malthus or David Ricardo) thought that natural resources imposed a binding limit on the growth opportunities of a nation.The law of diminishing returns to land meant that population growth would eventually require the use of low-quality land,and this would reduce production per capita and cap the potential for economic growth. During the 20th century, economists thought that the ultimate force driving economic growth was investment in physical capital and infrastructures.This belief underlay the many plans that governed the economy of the Soviet Union and the countries under its political or intellectual influence. It was also thefoundation upon which the international aid packages of institutions such as the World Bank operated for decades.The idea was that the growth rate of a country depended only on the fraction of its GDP that it invested. If the savings generated by its citizens were not enough to finance the investment required to achieve the desired growth rate, the World Bank would finance the difference (this iswhy this line of thought was, and still is, called the “financing gap”).The collapse of the Soviet model and the failure of many developing countries to grow, despite the aid of the Bretton Woods institutions, showed economists that investing in physical capital was not enough to improve the growth opportunities of a country.We had to look for other mechanisms. Education and training (or “humancapital,” as modern economists call it) became the center of economic research for a

1.1: The Growth Competitiveness Index 3

1.1: The Growth Competitiveness Index

4

couple of decades. During this time, developing countries were advised to educate their children and to invest in the expansion of their human capital.They did . . . but economic growth failed to materialize in most of them.Technological progress (whether created by the country or copied from the leading economies) was then thought to be a central determinant of economic growth.2 Few people today disagree with this idea, although this merely shifts the question from “what determines the growth rate of GDP?” to “what determines the rate of technological progress?”This is why economists kept searching. Many answers...