National Competitiveness, Dynamics of Adjustment and Long-term Economic Growth: Conceptual, Empirical and Policy Issues

Although the concept of national competitiveness is widely used by policy-makers at both the national and international levels, it has been the subject of severe criticism by Professor Krugman. He regards it as a meaningless concept and in the hands of naïve policy-makers 'a dangerous obsession' with harmful consequences. This paper challenges Professor Krugman's critique and suggests that its validity depends on a rather limited economic model whose assumptions are greatly at variance with the real world. The paper shows the analytical validity and usefulness of the concept specifically in relation to the UK and US economies.