Government influence on national competitiveness (evidence from the COVID era)

Abstract

Purpose: This paper aims to examine how government policy and institutions affect national competitiveness. A combined microeconomic and institutionalist model of competitiveness is applied. This structure is suitable for incorporating factors considered by global competitiveness rankings. The paper proposes that there are various possible government policy “configurations” leading to similar competitiveness outcomes, but different resilience outcomes during a crisis. Design/methodology/approach: Using the Institute for Management Development competitiveness rankings, covering 62 countries, between 2010 and 2019 the authors first build clusters based on observed “government policy configurations”. These clusters show an interpretable pattern: except for a few outliers, individual clusters contain countries that are economically and culturally similar. Then the authors examine how different clusters, with similar overall competitiveness scores, have performed in 2020–2021 during the COVID pandemic. Findings: The analysis shows that government efficiency is correlated with other factors of overall competitiveness. It shows that while similar levels of competitiveness are possible with different government “configurations”, it provides evidence that more welfare-oriented government “configurations” during the crisis led to a higher resilience of national competitiveness. Originality/value: The paper connects an institutionalist and microeconomic view of competitiveness in a unique model and embeds government policy in this structure. It shows that a similar level of competitiveness is possible through different government policy “configurations” and exploits the COVID shock to analyse resilience of these “configurations”.