Benchmarking competitiveness in transition economies

This paper constructs an indicator for the current level of international c ompetitiveness of countries in transition. We find that Hungary is the most competitive country in the group while Turkmenistan is the least. Competit iveness measurement, in our view, is a way to use uniform criteria to gauge the extent to which a country makes use of various levers to promote susta ined improvements in its well-being. We construct our measure of competitiv eness drawing upon both the popular literature on competitiveness as well a s modern economic theory. The approach acknowledges the importance of syner gies between firms, markets, and government and, above all, the crucial rol e of institutions. Our choice of variables stresses the special characteris tics of transition countries. By bringing to bear all the existing data on these countries, together with new survey data collected for the purpose, w e are able to go beyond the mere ranking of countries to decompose the sour ces of competitiveness into their constituent parts. This allows policy mak ers to identify areas where their countries are lagging behind relative to other countries in their region. Our indicator is also compatible with the Global Competitiveness Report series categories, thus allowing us to benchm ark transition countries against the rest of the world.