competitiveness and inequality in cefta and selected eu countries

Belgrade, 26-27 November, 2015. Institute of Economic Sciences,

Belgrade

COMPETITIVENESS AND INEQUALITY IN CEFTA AND SELECTED EU COUNTRIES

Despotović DanijelaNedić Vladimir

Cvetanović Dušan

International Conference DEVELOPMENT, COMPETITIVENESS AND INEQUALITY IN EU AND

WESTERN BALKANS

Belgrade, 26-27 November, 2015. Institute of Economic Sciences,

Belgrade

For the last thirty years, the phenomenon of improving competitiveness and innovativeness has been at the top of the list of economic policy goals in most economically prosperous countries.

The paper makes an attempt to identify the character of the relations between a country’s competitiveness and innovativeness trends and economic inequality.

Introductory considerations

Porter's concept of competitiveness

GCI (WEF) framework

Sustain competitiveness

Socially sustainable competitiveness and environmentally sustainable competitiveness

GINI

The research is focused on two population groups:1. group of countries that have been

or are current members of CEFTA and

2. EU-15 group of countries.

Research

Scope of reserch2006 - 2013

The basis for defining competitiveness and innovativeness is WEF’s GCI framework with 3 sub-indices, while the level of economic inequality is quantified by the GINI index, according to the World Bank and Eurostat data.

Model

Subindex weights and income thresholds for stages of development

10*).().(1XSISI

SISI BGCIAGCI

α – weight for basic requirements GCI.Aβ – weight for efficiency enhancers GCI.B

SI – stages of development of observation economywhere I goes from 1 to 5

H0: Increasing levels of national competitiveness (X1) and the increasing levels of national innovativeness (X2) has a desirable negative synergic influence on the exogenous variable – economic inequality (Y).

Y = a0 + a1*X1 + a2*X2

Y (the dependent variable) – GINI index; X1 (independent variable 1) – GCI Basic & Efficiency

competitiveness; X2 (independent variable 2) – GCI Innovativeness &

Sophistications; ai (i = 0 - 2) – are constants acquired from multiple

regression process.

The main hypothesis

Research results

Descriptive statistics for X1 - Basic & Efficiency competitiveness

scale from 1 to 7 (best)

Descriptive statistics for X2 - Innovativeness & Sophistications

scale from 1 to 7 (best)

Descriptive statistics for Y – GINI

scale from 0 (best) to 100

Single regression X1 (independent variable 1) –

GCI Basic & Efficiency competitiveness;

X2 (independent variable 2) – GCI Innovation and sofistication;

Y (t

he d

epen

dent

var

iabl

e) –

GIN

I in

dex;

CEFTA countries

Single regression

indicate

GINI index

decreseBasic & Efficiency

competitiveness increase

EU 15 countries

GINI index

Basic & Efficiencycompetitiveness

CEFTA countries

GINI indexInnovation & sofistication EU 15

countries

GINI index

Innovation & sofistication

stronger

less strong

CEFTAGCI Basic requirements & Efficiency enhancers adjusted (Variable X1) as a representative of the basic competitiveness of the economy exerts statistically significant influence on the GINI index: in the group of CEFTA countries influence coefficient is about -3.7 (increase in variable X1 reduces the GINI coefficient), while in the group EU-15 influence coefficient (about 2.3) has the positive sign (increase in variable X1 causes an increase in GINI coefficient).

Multi-linear regression analysis

Y = 77-3.8*X1 -8.4 *X2 + eR2 = 0.48; adjusted R2 =

0.47; e = 4.1

EU 15GCI Innovation and sophistication factors (variable X2) as a representative of the economy’s innovativeness exerts statistically significant influence on reducing the GINI index in both groups of countries observed: in the group of CEFTA countries influence coefficient is about -8.5 (increase in variable X2 reduces the GINI coefficient by 8.5 times), while in the group EU-15 influence coefficient is somewhat lower (-5.8) (increase in variable X2 causes a decrease in GINI coefficient by 5.8 times).

Multi-linear regression analysis

Y = 45 + 2.4*X1 – 5.8*X2 + eR2 = 0.64; adjusted R2 =

0.64; e = 2

CEFTA countries

GINI index

decreseBasic & Efficiencycompetitiveness

increase

EU 15 countries

GINI index

Basic & Efficiencycompetitiveness

CEFTA countries

GINI indexInnovation & sofistication EU 15

countries

GINI index

increase

Innovation & sofistication

Multiple regression

indicate

stronger

less strong

The conclusion is that by implementing the strategic innovation policies, CEFTA countries (current CEFTA members could also take a regional approach to innovation strategies) could strongly reduce economic inequalities represented by the GINI index which is on average slightly higher in these countries than in the EU15 countries.

This would further increase their social component of sustainable competitiveness and thereby the overall sustainable competitiveness of the entire region.

The policy makers must, strategic and through fine tuning, adjusted agenda of national and regional innovation policies.

Conclusion

A rising tide lifts all boats.

A truly good outcomebenefits all.

Ted Sorensen

Thank you for your attention

Contact and informations: ddespotovic@kg.ac.rs