Beyond Competitiveness: Is Productivity Everything?

Abstract Our study examines whether productivity is a better predictor of economic growth than the Competitiveness Index (GCI). Our empirical findings suggest the following. First, we find that ranking countries by productivity matches the GCI results. Second, the correlation between all 12 sub-pillars of GCI, and the overall GCI and productivity yield similar results. Third, using a panel dataset for 104 countries over 2007–2019, our panel VAR (PVAR) results indicate that productivity has a stronger prediction power for both real GDP growth, as well as for the inequality-adjusted GDP growth compared to the GCI. Finally, using the residuals of a regression of productivity on GCI, we explore the drivers of the differences between productivity and GCI. We find that higher values of rule of law, property rights, economic freedom and political stability explain why advanced economies are positioned higher in their level of productivity than in the GCI ranking. JEL codes: C33; E24; E61; O47