Friday, 26 March 2010: 09:00
Competitiveness defined by World Economic Forum as the set of institutions, policies, and factors that determine the level of productivity of a country is one of the key determinants of country`s prosperity.
Neoclassical economics in fact excludes institutional aspects of economic activity, therefore such analysis cannot fully explain differences in level of competitiveness.
As Solow (1957) indicates there is a large TFP residual (when economic growth measured in neoclassical way) that is at least as important as measured factors (capital and labor).
Jones and Romer (2009), among others, claim that institutions must be a fundamental source of differences in growth rates between low income countries.
The reports examining quality of institutions clearly show that transition economies have inefficient institutions. The key question is why such institutions exist and what is their impact on competitiveness. The study makes an attempt to answer this question by presenting institutional factors influencing competitiveness with special emphasis on transition economies.
Neoclassical economics in fact excludes institutional aspects of economic activity, therefore such analysis cannot fully explain differences in level of competitiveness.
As Solow (1957) indicates there is a large TFP residual (when economic growth measured in neoclassical way) that is at least as important as measured factors (capital and labor).
Jones and Romer (2009), among others, claim that institutions must be a fundamental source of differences in growth rates between low income countries.
The reports examining quality of institutions clearly show that transition economies have inefficient institutions. The key question is why such institutions exist and what is their impact on competitiveness. The study makes an attempt to answer this question by presenting institutional factors influencing competitiveness with special emphasis on transition economies.