Global Competitiveness Index

The Global Competitiveness Index (GCI) is an aggregate measure of the set of critical factors that, as a [Page 766]group, determine the degree to which countries are expected to achieve levels of economic prosperity in the short and medium term. The GCI, introduced in 2004, was developed by Columbia University professor Xavier Sala-i-Martin for the World Economic Forum (WEF). The WEF, incorporated as a foundation in 1971, is a nonprofit, independent international organization based in Geneva, Switzerland. It publishes the annual competitiveness ranking of countries in its Global Competitiveness Report (GCR) based on the GCI. The report also includes comprehensive listings of the main strengths and weaknesses of countries, making it possible to identify critical areas in need of policy reform. While there are other similar reports published using their own competitiveness measures (e.g., Ease of Doing Business Index and the Indices of Economic Freedom), economists generally consider the WEF's index and rankings as representing the most competitiveness.

The GCI rankings are calculated from both publicly available data—such as that provided by the United Nations—and the Executive Opinion Survey (EOS). The EOS is a comprehensive annual survey conducted by the WEF, together with its network of “Partner Institutes” (leading research institutes and business organizations) in the countries covered by the GCR. The EOS is designed to measure a wide range of factors that impact a country's current and future business climate. For the 2007–08 EOS, approximately 11,000 business executives—deemed as representative leaders in their field—were polled in 131 countries. This represents the most comprehensive report to date in terms of number of countries included (the 2006–07 EOS covered 123 countries). Countries added to the 2007–08 EOS, and in turn the GCI, include Puerto Rico, Libya, Oman, Saudi Arabia, Senegal, Syria, and Uzbekistan. In addition, Serbia and Montenegro, previously analyzed as a single country, are now included separately. The theoretical-empirical model used to determine the GCI rankings incorporates over 90 variables that relate to a country's current and prospective economic profile. Two-thirds of these variables come from the EOS and the remaining one-third from publicly available sources.

Pillars and Stages

The GCI is based on 12 categories—referred to in the GCR as “pillars” —of competitiveness. These categories as a whole provide a comprehensive picture of the competitiveness landscape in countries around the world at all stages of development. These categories are Institutions, Infrastructure, Macroeconomic Stability, Health and Primary Education, Higher Education and Training, Goods Market Efficiency, Labor Market Efficiency, Financial Market Sophistication, Technological Readiness, Market Size, Business Sophistication, and Innovation. Certain categories are more important than others within different countries in determining their degree of competitiveness. For example, what generates productivity in Denmark significantly differs from what drives it in Cameroon. This is because the two countries are in different stages of economic development. Accordingly, the GCI separates countries into three specific economic stages according to per capita income. These stages—designated “factor-driven,” “efficiency-driven,” and “innovation-driven” —reflect a growing measure of complexity with regard to how a country's particular economy operates.

In the factor-driven stage, countries compete based on their factor endowments, which are mainly unskilled labor and natural resources. Companies compete on the basis of prices of basic products or commodities and low productivity is accompanied by low wages. At this stage of development, competitiveness depends on a country having decent public and private institutions, acceptable infrastructure, a strong macroeconomic framework and good healthcare and basic education for its population.

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