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Edexcel A Level Economics A:复习笔记4.1.9 International Competitiveness

Category: A-level课程, 教材笔记, 福利干货 Date: 2022年9月28日下午4:45

International competitiveness refers to how well a country's products compete in international markets
- Competitiveness can change over time
In order to make a comparison between the competitiveness of two countries, two metrics are commonly used

Relative unit labour costs: the total wages in an economy divided by output. This provides a number that indicates the labour costs for each unit of output produced. It is then possible to look at the relative unit labour cost for the UK compared to France. If it is lower than the UK is more competitive in the international market
Relative export prices: monitoring export prices provides insight into whether they are rising or falling over time. If they are rising in the UK relative to other countries, then the UK is becoming less competitive. If they are falling in the UK, it is becoming more competitive

When considering factors that influence international competitiveness, the word relative is important
- If inflation is happening at an equal rate in all competitor nations, there will be little change to the level of competitiveness
- However, if it increases more in the UK relative to its competitors, then the UK competitiveness in international markets will decrease

Factors Influencing International Competitiveness

Factor

Explanation

Relative unit labour costs

A rise in productivity levels of UK workers, relative to their competitors, will lower the production cost per unit & increase competitiveness
A decrease or stagnation in productivity, relative to their competitors, will worsen competitiveness

Relative wages & non-wage costs

Increases in labour costs, relative to other countries, are likely to make exports more expensive as the costs of production have increased resulting in a worse level of competitiveness
Increases in non-wage costs such as pensions or social security taxes paid by the employer are likely to reduce output or raise costs of production, thus making exports less competitive
Decreasing wage & non-wage costs have the opposite effect

Relative rate of inflation

Inflation raises the price of goods/service in an economy
If inflation increases in the UK, relative to other countries, then foreign buyers pay more for the exports they purchase & this worsens competitiveness
Decreasing inflation has the opposite effect

Relative level of regulation

Government regulation tends to raise costs of production as it sets standards/requirements that firms have to meet
Increased costs of production mean that export prices are likely to rise & competitiveness will worsen
Deregulation may have the opposite effect

Export led growth: An increase in exports generates an increase in economic activity resulting in economic growth
Unemployment decreases: Economic growth leads to an increase in employment, incomes & wage growth
Current account surpluses: exports are likely to be greater than imports & the government does not have to concern itself with difficult policy decisions aimed at reducing a large deficit
Increased overseas foreign direct investment (FDI): It provides finance for firms to invest in overseas assets which in the long-term means they are able to increase their income & profit
Standards of living improve: as incomes tend to rise with economic growth, households gain purchasing power & access to a wider variety of goods/services

In many ways, the problems of being uncompetitive are the reverse of the above. The following point is worth highlighting

Government policies: with a current account deficit & a lack of international competitiveness, governments will focus more of their resources on gaining ground. E.g. more spending on supply-side policies. Any policy action creates opportunity costs & trade-offs

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