productivity in global competitiveness

It would get a score of 10 if it ranked highest among the sample, and a score of 0 if it ranked lowest. A cost-cutting producer would in that case attract quite a few customers from its competitors. The more intense competition is, the more likely it is that market players invest in productivity enhancing methods of production. The smaller the country, the better its companies seem to be represented in the data. It may not only reflect economic rent, but all kinds of data biases and errors too. Again there was some ambiguity in the outcomes. A leading study for the EU has been made by Cincera & Galgau (2005). They counted seven and had an average HHI of 227, which was 40 points lower than in Belgium. Among further determinants underlined by the economic literature, competition conditions are particularly interesting as improving these conditions is generally not budgetary hurting and could be linked to the administrative simplification process. Other implications that rather make the estimation a proxy hold as well: no relevant markets; odd accounts; value added rather than turnover. **) 22 Member States and Norway. Cet article explore la mesure des conditions de concurrence en analysant cinq mthodes utilises dans la littrature conomique. These accounts only report primary cost such as wages and depreciation, but no purchases of goods and services. It builds on the idea of allocative efficiency, which says that under perfect competition a market should attract entry as long as revenue exceeds cost. They are followed by an indication whether Belgium performs better (B), more or less equal (E) or worse (W) than the other Member States. Moreover, for most countries the entry and exit rates are systematically high, moderate or low: when a country shows high (low) entry and exit rates, it is the case in most of its industries. (2010) Braila et al. Germany, the Netherlands, Austria and Denmark are not in the sample of the profit elasticity. Adding new intangibles to national account assets brings the GDP share of total intangible investment to 8.8% in the US and 7.2% in the EU14. 2The results show a cumulative deterioration, over the period 1996-2007, of Belgian market economy[1] competitiveness by 6.1% compared with the weighted average of the three neighbouring countries. Again this is only part of the story. The ambiguity may stem from the geographical dimension or from diversification. Fourth, competition leads to the growth of productive firms through the leveraging of economies of scale, while at the same time inducing the exit of the least productive firms.25. For entry & exit and market-share stability it showed relatively strong arrears, indicating weak dynamics. The classic example of the iPod supply chain discussed by Dedrick et al. [6] For all three, the intensity of competition in the other European countries evolved in the same direction. Throughout the time series (1997-2006) the number of companies in the sample has been increasing. The price-cost margins, however, diverged for the worse, although some ambiguity in the interpretation of the measure cannot be ruled out. Supermarket chains compete with each other on the national market, but compete the grocery stores on their local markets. The same methodology has been applied in a number of other country studies, always revealing the relevance of the growth contribution of unmeasured intangible capital. While the literature mainly agrees that participating in GVCs is largely beneficial, it has also been stressed that advantages are not equally divided among GVC participants. Given the interpretation of profit elasticity and from the viewpoint of productive and dynamic efficiency, increasing intensity of competition may very well go hand-in-hand with increasing profitability. The average entry and exit rates are significantly lower than those of most other countries, 6.0 versus 9.2% (9.1% for the neighbouring countries). Finally, there may be an impact of quality improvements, differences in capital and labour cost, and differences in sales volume (e.g. Number 2/ He analysed the same measures, in some cases from more detailed data sources, and managed to relate the weak performance to the strong market regulaton of that industry in Belgium. In services they had also fallen, but with Belgium clearly converging to the other countries average. Intereconomics/ There may be country- or industry-specific circumstances unrelated to competition. Entry & exit indicates the vigorousness of the interaction by the challenge of newcomers and the defeat of inefficient producers. Given the complex nature of competition, however, one should be aware of the caveats and pitfalls of the measures. One of the drivers of productivity growth is product market competition. First, an industry typically comprises many different products, each having its own relevant market. Compared to the neighbouring countries this difference has become even more (0.29 points). This will also allow countries to benefit from the ongoing process of globalisation and participation in international value chains. The latest Global Competitiveness Report paints a gloomy picture, yet it also shows that those countries with a holistic approach to socio-economic challenges, look set to get ahead in the race to the frontier. Belgium ranks among the lower half, but not too deeply (score of 3.8 on a scale of 10). There is, however, no guarantee this will happen in the real world. Instead of marginal cost, however, average cost is mostly applied as a proxy, since it can easily be derived from company or industry data. (2010), Eurostat and EUKLEMS. Although it holds no mathematics, the section may arrive as a bit technical. An advantage is that it includes an estimation of entrepreneurial income into labour compensation. It has been developed by Sakakibara & Porter (2001) and builds on the logic that competition makes certain market players gain market share at the cost of others. Since it is estimated from company accounts this is addressed by average cost and fiscal profits. Volumes/ Molnr (2010) estimated a parameter for returns to scale that could correct the markup. Indeed, empirical evidence shows that joining GVCs brings positive and significant gains in productivity.16, But what factors facilitate countries participation in GVCs? Therefore, more sophisticated analyses may help shed light on the possible mediating role of intangible assets in affecting the relationship between GVC participation and productivity growth. Second, imported goods are of course not covered by domestic manufacturing industries. It neglects rivalry among incumbent producers. 30From the measures of market concentration (services only) and profit elasticity, one could prudently conclude that the intensity of competition has evolved more favourably in Belgium than in other Member States. Nicoletti & Scarpetta, 2003; Conway & Nicoletti, 2006) as an indicator of competition. equipment 0.00 E -2.0% W +128 W 0.0% E +0.19 B Transport equipment +0.07 W -2.1% W +33 E +0.4% B +1.41 B Other manufacturing: : -2.1% W -70 B: :: : Public utilities +0.23 W: :: : +0.7% B +0.16 E Construction +0.06 W -4.7% W: : -0.3% E +0.55 B Wholesale & retail +0.15 W -3.9% W +34 E -0.1% E -0.61 W Hotels & restaurants: : -2.2% W: :: :: : Transport & storage +0.01 E -2.6% W +21 E -0.3% E +0.07 E Communications -0.11 B -2.9% W -18 E -0.2% E +0.34 B Financial services 0.00 E -1.2% E: : +0.2% E -0.20 E Real estate } +0.02 E +0.2% E: : +0.9% B +0.07 E Renting } -3.8% W } +16 E +0.4% B -0.52 W Software -1.0% W +1.01 B Research & development: :: : Professional services: :: : Manufacturing +0.09 W -2.6% W +96 W +0.2% E +0.04 E Market services +0.05 W -3.2% W +20 E +0.1% E -0.03 E All branches +0.06 W -3.3% W +68 W +0.1% E -0.02 E Sources: Braila et al. For manufacturing there has been some convergence with respect to the neighbouring countries. Source: R. Mudambi: Location, control and innovation in knowledge-intensive industries, in: Journal of Economic Geography, Vol. 7The measurement of competition conditions is not a straightforward task. This is not only induced by theoretical reasons, but maybe the more so from the applied data, which often do not fit the theoretical requirements. Besides the selection effect, market concentration thus involves a reallocation effect. (2010) Time (series) 1996-2005* 2006 1997-2006 1998-2005**** 1997-2005 Countries 9 of EU-15 23** of EU-27 21 of EU-25 13 of EU-15 7 of EU-15 Industries 17 19 17 19 19 Manufacturing - weight (avg. equipment 1.04 1.04 3.9% 5.8% 368 240 1.3% 1.3% 2.22 2.03 Transport equipment 1.01 0.95 5.0% 7.2% 287 254 2.1% 1.7% 3.25 1.84 Other manufacturing: : 4.2% 6.3% 165 235: :: : Public utilities 1.32 1.09: :: : 3.0% 2.2% 0.76 0.60 Construction 1.14 1.08 5.3% 10.1%: : 0.5% 0.8% 2.06 1.51 Wholesale & retail 1.23 1.08 5.0% 8.8% 142 108 0.8% 0.9% 1.30 1.90 Hotels & restaurants: : 7.2% 9.5%: :: :: : Transport & storage 0.88 0.87 4.8% 7.3% 258 237 0.7% 0.9% 0.90 0.84 Communications 0.96 1.06 11.6% 14.5% 253 272 2.1% 2.3% 1.23 0.89 Financial services 1.14 1.15 9.9% 11.0%: : 2.8% 2.6% 0.60 0.80 Real estate } 1.14 1.12 9.3% 9.1%: : 1.8% 0.9% 0.60 0.54 Renting } 6.7% 10.5% } 190 174 1.9% 1.5% 0.14 0.67 Software 0.7% 1.7% 2.17 1.16 Research & development: :: : Professional services: :: : Manufacturing 1.15 1.06 4.1% 6.7% 302 206 1.2% 1.0% 1.82 1.78 Market services 1.14 1.09 6.3% 9.4% 206 186 1.4% 1.3% 1.07 1.10 All branches 1.14 1.08 6.0% 9.2% 267 199 1.3% 1.2% 1.26 1.27 Sources: Braila et al. There may well be strong rivalry in a concentrated market and/or weak rivalry in a non-concentrated market. High entry and exit thus indicates vigorous competition. Market economy Germany France Netherlands Belgium Spread between Belgian variable and weighted average of 3 neighbours Unit Labor Cost -0,5 13,4 19,1 13,2 6,1 Hourly wage 19,8 42,6 51,9 34,8 2,7 Hourly productivity 20,4 25,8 27,5 19,0 -3,3 -Capital deepening 11,3 8,6 6,7 15,6 5,3 -Labor composition effect 0,0 4,2 4,3 3,3 1,3 -TFP 8,2 11,2 14,5 -0,3 -9,3 Manufacturing Unit Labor Cost -9,3 -4,4 3,4 1,8 8,2 Hourly wage 28,1 43,4 48,5 38,4 1,9 Hourly productivity 41,3 49,9 43,6 36,0 -5,8 -Capital deepening 6,4 11,7 9,4 17,7 8,3 -Labor composition effect 3,0 6,2 4,4 4,8 0,4 -TFP 29,0 26,4 25,8 10,4 -13,4 Market services Unit Labor Cost 4,5 16,9 14,8 19,2 8,1 Hourly wage 18,7 40,9 54,4 35,4 3,9 Hourly productivity 13,5 20,5 34,5 13,6 -3,9 -Capital deepening 16,2 9,2 8,1 17,1 3,9 -Labor composition effect -0,9 3,6 4,0 3,6 2,3 -TFP -1,4 6,5 19,6 -6,5 -9,7 Source: Own calculations based on EUKLEMS database release November 2009. 21As introduced in the previous section, the economic rent is the markup of price over marginal cost. For international benchmarking a database is available at Eurostat. This could be confirmed by the price-cost margin when the effects of productive and dynamic efficiency dominate those of allocative efficiency.

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