The competitiveness of nations: Why some countries prosper while others fall behind

Why do some countries perform much better than other countries? This paper outlines a synthetic framework, based on Schumpeterian logic, for analyzing this question. Four different aspects of competitiveness are identified: technology, capacity, demand, and price. The contribution of the paper is particularly to highlight the three first aspects, which often tend to be ignored due to measurement problems. The empirical analysis, based on a sample of 90 countries on different levels of development during 1980-2002, demonstrated the relevance of technology, capacity, and demand competitiveness for growth and development. Price competitiveness seems generally to be of lesser importance. (C) 2007 Elsevier Ltd. All rights reserved.