Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/3736
Authors: 
Siebert, Horst
Year of Publication: 
2005
Series/Report no.: 
Kiel Working Paper 1258
Abstract: 
Krugman's verdict that competitiveness of countries is a largely meaningless concept is a serious misjudgement of the economics profession. Countries compete for the mobile factors of production, most importantly for capital and technology. The exit-option of these factors and of firms changes the calculus of national governments. This paper sets out the main elements of the concept of competition between locations - locational competition - and analyses its impact on welfare and employment of the capital-exporting country. It also looks at whether competition between countries necessarily results in a race to the bottom or whether it can function as a controlling mechanism for governments and as a discovery device. The paper discusses under which conditions common rules are needed to reduce transaction costs and to prevent strategic, opportunistic behaviour of countries and which common rules thus reduce transaction costs. Finally, it deals with the question whether one institutional equilibrium in the world economy can be expected or whether many national equilibriums can coexist.
Subjects: 
Mobile and immobile factors of production
Exit option of capital
Impact of capital exports on the capital
Competitiveness of countries
JEL: 
F
H
J
Document Type: 
Working Paper

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