Competitiveness In Canada

Canada's economic system is a market economy, encompassing the production, sales and distribution of goods and services based upon prices set in the marketplace. The marketplace establishes an economic framework within which firms compete on the basis of a number of factors: price, quality, delivery, after-sales service etc. Competitiveness is a measure of the ability to succeed in this context. This article presents several different approaches to mcasuring competitiveness, and analyzes many of the factors influencing its enhancement.
TJlE CONCEPT OF COMPETITJWNESS
The World Competitiveness Report, prepared by the Geneva-based World Economic
Forum and the International Management Development Institutc in
Lausanne, defines competitiveness
Understanding the various factors that promote, or conversely hinder, economic growth remains a key task of economics.
The vast literature on economic growth theory falls into three broad categories.
The early post-World War I1 growth models, primarily associated with the work of Evsey Domar and Roy Harrod, emphasize the importance of savings and capital investment in stimulating economic growth. The basic assumption underlying these models is that an economy's output depends upon the underlying amount of capital investment, and that it is the savings of people and firms that make such investment feasible. An economy's output is linked to its stock of capital by a capital-output ratio which is constant.
This emphasis on savings and capital investment as the foundations of economic growth has a long tradition in economic theory. As a recent article in the Journal of Economic Literature points out, much of Adam Smith's famous treatise, The Wealth of Nations, is devoted to analyzing the forces that determine the rate of capital accumulation and to extolling practices that tend to increase it, mainly the frugality of the emerging bourgeoisie of the time.
The early growth models of Harrod and Domar tend to subsume
Each addition of a
DAVID BARROWS AND JOHN A. COTSOMITIS unit of capital, given a fixed supply of labour, will generate a smaller yield than the one before it.
As a special report of The Economist notes, these assuniptions give the neoclassical model two important attributes. As the stock of capital in an economy increases, growth will slow down and eventually come to a halt. Without continuous technological progress, the diminishing marginal productivity of capital will ultimately choke off economic growth. Second, poorer nations should grow more rapidly than advanced countries. Starting from a smaller capital base, :hey should garner higher yields from each new unit of investment.
While the neoclassical model of growth emphasizes the importance of technological progress to economic growth, it does not attempt to explain it.
Rather, it treats technology as an exogenous variable, one which arises from outside the model. However, such an assumption is difficult to maintain. Technological knowledge accumulates for the same reason that capital stock does, because economic agents decide to invest resources in activities that