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Summary AQA A-level Economics: International Competitiveness Notes
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Key Summary Notes for the AQA A-level Economics course on International Competitiveness, guaranteed to boost you to the top grades.
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International CompetitivenessInternational Competitiveness = The Ability of a nation to compete
successfully overseas and to sustain improvements in living standards and
output.
- One country to compete with another country overseas.
Competitiveness:
1) Price Competitiveness
When a country is selling products overseas - they need to be price
competitive to actually sell in another country.
2) Non-Price Competitiveness E.g Brand Awareness/Loyalty, Service
Quality, Innovation
In nations where price is not competitive maybe due to high cost of
production.
Nations can compete on non-price factors - to drive competitiveness.
3) Ability to Attract FOP
As the world has become more globalized - this has become more
important.
Attracting FDI/FOP - If a country can attract better FOP such as
entrepreneurs or skilled workers or capital (businesses).
This country will be more competitive.
Measure of Competitiveness:
1) Unit Labor Costs
Total labor costs/output
If there is high productivity and labor costs are the same - output rises - unit
labor costs fall - keeps costs of production low - reduce prices - increase
price competitiveness
Skills - If there are higher skills and cost of labor are the same - keeps
costs of production low - reduce prices - increase price competitiveness
, Labour Regulation - High Minimum wages - increase unit labor costs -
increase costs of production - reduce price competitiveness.
2) Global Competitiveness Index (GCI)
Lots of different factors that influence International Competitiveness
Low GCI Index = Low International competitiveness
High GCI Index = High International competitiveness
3) Terms of Trade
Terms of trade = (Index of export prices/index of import prices) x100
Greater number = Better terms of trade position but WORSE price
competitiveness
Factors that Determine International Competitiveness:
If any of these factors improve - International Competitiveness Improves.
Link these to: Price competitiveness, Non-price Competitiveness and ability
to attract FDI.
1) ULC’s
(Above)
2) Labour Flexibility
How easily can workers move Jobs - occupational/geographical Immobility
What flexibility is there in terms of skills of the labor force
What flexibility in working arrangements for country
Do workers likely to work part time /0 hour contracts- reduce costs of
production for firms - raise price competitiveness.
3) Labour Skills
4) Tax Regimes
Are corporation taxes low - can result in more profit - more reinvestment
into capital - increased efficiency - lower production costs - higher price
competitiveness.
Low Corporation tax can attract FDI - improving international
competitiveness.
Lower Income Taxes - Attract more workers from abroad - increase
competitiveness of labor.
5) Innovation
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