Economics

Study Notes

Competitiveness and Economic Policies

Level:
AS, A Level
Board:
AQA, Edexcel, OCR, IB

Raising competitiveness in domestic and overseas markets is a key objective for many governments. The usual focus is on improving supply-side performance but keep in mind that a sufficient level of demand is needed for many supply-side policies to be most effective

2014-15 competitiveness ranking for the UK

Education policy

  • Investment in / improvements in functional literacy
  • Stronger vocational education / apprenticeships
  • Investment in higher education, encouraging inward migration

Infrastructure

  • Transportation systems
  • Communications e.g. super-fast broadband
  • Investment in public service infrastructure such as new schools and hospitals

Labour markets

  • Improving labour mobility
  • Improving work incentives
  • Better management

Supporting Enterprise

  • Incentives for new business formation
  • Access for small/medium sized businesses requiring finance for expansion
  • Incentives for innovation and invention

Exchange rate and trade policy

  • Possible intervention in currency markets
  • Currency devaluation to boost export industries
  • Tariff and non-tariff barriers
  • Trade agreements

Macro Stabiility

  • Maintaining low inflation / price stability
  • Financial stability e.g. a sustainable banking system
  • Avoiding credit / debt bubbles
  • Avoiding boom and bust in property markets

Exam Tip: Policies to improve competitiveness must always be contextual i.e. they must suit the specific challenges and demands facing businesses in a particular country. Be prepared to evaluate the likely effectiveness of different supply-side policies.

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