THE EUROPEAN COMPETITIVENESS INDEX: CONCEPT, MEASUREMENT, IMPLICATIONS AND LINKS WITH RESILIENCE Robert Huggins The Management School University of Sheffield Presentation to the International Conference on Small States and Economic Resilience Valletta, Malta, 23-25 th April 2007
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THE EUROPEAN COMPETITIVENESS INDEX: CONCEPT, MEASUREMENT, IMPLICATIONS AND LINKS WITH RESILIENCE
THE EUROPEAN COMPETITIVENESS INDEX: CONCEPT, MEASUREMENT, IMPLICATIONS AND LINKS WITH RESILIENCE Robert Huggins The Management School University of Sheffield Presentation to the International Conference on Small States and Economic Resilience Valletta, Malta, 23-25 th April 2007. Outline - PowerPoint PPT Presentation
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THE EUROPEAN COMPETITIVENESS INDEX:CONCEPT, MEASUREMENT, IMPLICATIONS AND LINKS WITH
RESILIENCE
Robert HugginsThe Management School
University of Sheffield
Presentation to the International Conference on Small States and Economic Resilience
Valletta, Malta, 23-25th April 2007
Outline
The Concept of Competitiveness
Introducing the European Competitiveness Index
The Role of the Knowledge-Base of an Economy
Competitiveness and Resilience
Conclusions.
European Council:
"Europe must renew the basis of its competitiveness,increase its growth potential and its productivity and
strengthen social cohesion, placing the main emphasis on knowledge, innovation and the
optimisation of human capital”
Source: Presidency Conclusions, European Council, March 2005
What is Competitiveness?
We define competitiveness as the capability of an
economy to attract and maintain firms with stable or
rising market shares in an activity, while maintaining
stable or increasing standards of living for those who
participate in it.
Regional Competitiveness
The competitiveness of a region will depend on its ability to anticipate and successfully adapt to internal
and external economic and social challenges, by providing new economic opportunities, including
higher quality jobs.
What Makes a Competitive Region?
Competitiveness is influenced by a number of different factors including public and private
investment in human capital, the quality of physical infrastructure, the productivity of the workforce,
institutional capacity, social capital, innovation and research facilities, accessibility to markets, and so on.
In other words, competitiveness is increasingly being measured in terms of creativity, knowledge and environmental conditions, rather than purely on
accumulated wealth.
European Competitiveness Index – Geographic
Scope:
The European Competitiveness Index 2006- include all EU-25 nations and their respective NUTS-1 regions, as well as Norway and Switzerland.
The continued focus on regions, as well as nations, reflects the growing consensus that it is regions that are the primary spatial unit that compete to attract investment, and the level at which knowledge is
circulated and transferred, resulting in agglomerations, or clusters, of industrial and service
sector enterprises.
Throughout the report an index value of 100 refers to the mean average of the EU-25 regions plus Norway
and Switzerland.
Methodology (1)
All data are first converted so that the mean and variance of each variable is set at zero and one respectively. After the standardisation, factor
analysis is applied to the data set.
To extract the common part of variations among the original variables (i.e. commonalities), image factoring is employed. The dimensions obtained
are then rotated. Varimax is used with Kaiser normalisation.
While identifying common dimensions of the underlying structure, factor analysis also shows the location of each case (i.e. region in this study) within the underlying structure, by providing the case's scores for the
dimensions identified.
Methodology (2)We use these scores for the dimensions as sub-composite indices.
Subsequently, we aggregate these sub-composite indices with a view to obtaining a single composite.
Data Envelopment Analysis (DEA) is used to obtain a single composite index from the above sub-composite indices.
DEA is a linear programming technique originally developed for the estimation of the relative efficiency of a set of units (called decision
making units, DMUs) producing a set of outputs from common inputs.
It neither assigns weights to variables with any dependent variable chosen a priori, nor assigns weights set a priori. Instead, it seeks a
set of weights for each unit that maximises a weighted sum of
variables.
Is Competitiveness Similar to Resilience?
Resilience Versus Competitiveness of European Nations
R2 = 0.5692
0.5
0.55
0.6
0.65
0.7
0.75
0.8
0.85
0.9
0 50 100 150 200
European National Competitiveness Index
Resilie
nce In
dex
(Bri
gu
glio
et
al., 2005)
Towards a European Regional Resilience Index
Adaptation of Briguglio et al.’s (2005) National Resilience Index:
Macroeconomic stability index - adjusted to account for regional GDP (per capita) and unemployment rates.
Social development index - adjusted to account for regional educational rates (based on numbers in upper secondary and
vocational education).
Governance index – although in world of multi-level governance the regional level is becoming increasingly prominent there are few
existing metrics.
Microeconomic efficiency index – regulation is still largely a national issue, although markets often have a regional focus.
A Very Tentative European Regional Resilience Index
Rank RegionResilience
Index Rank RegionResilience
Index
1 Uusimaa, Finland 0.781 21 Prague, Czech Republic 0.679
2 Denmark 0.758 22 Stockholm, Sweden 0.679
3 Etelä-Suomi, Finland 0.753 23 Övre Norrland, Sweden 0.678
4 Pohjois-Suomi, Finland 0.751 24 Östra Mellansverige, Sweden 0.677
5 Länsi-Suomi, Finland 0.737 25 Norway 0.676
6 Itä-Suomi, Finland 0.729 26 Wales, UK 0.675
7 Southern and Eastern, Ireland 0.726 27 Småland med öarna, Sweden 0.674
8 Switzerland 0.719 28 West Midlands, UK 0.673
9 Noord-Nederland, Netherlands 0.718 29 East Midlands, UK 0.671
10 Westösterreich, Austria 0.718 30 Västsverige, Sweden 0.671
11 Oost-Nederland, Netherlands 0.702 31 South West, UK 0.668
12 Zuid-Nederland, Netherlands 0.701 32 Sydsverige, Sweden 0.667