This National Bureau of Economic Research working paper sets foundational competitiveness as the expected level of output per working-age individual that is supported by the overall quality of a country as a place to do business. The focus on output per potential worker, a broader measure of national productivity than output per current worker, reflects the dual role of workforce participation and output per worker in determining a nation's standard of living. The paper highlights three broad and interrelated drivers of foundational competitiveness: social infrastructure and political institutions, monetary and fiscal policy, and the microeconomic environment. Using this framework, a new concept of global investment attractiveness arises, which is defined as the cost of factor inputs relative to a country's competitiveness. The analysis reveals important insight into the economic trajectory of individual countries. It also offers a novel methodology for estimating a theoretically grounded and empirically validated measure of national competitiveness.
Image: Karen Bleier, AFP/Getty Images