Is global competitive index a good standard to measure economic growth? A suggestion for improvement

Global Competitiveness Index (GCI) developed by the World Economic Forum (WEF) has been used as a standard to measure a country’s competitiveness and therefore is expected to be related to economic strength and growth. However, if GCI can be used to predict future economic growth is lacking. We were motivated to fill such a research gap by showing the predictive validity of GCI relative to Total Entrepreneurial Activities (TEA) and national culture. Using data collected from 40 countries, we regressed the three indices on GDP growth rate over five years period. We found that individualism and power distance dimensions of national culture have better prediction power than GCI. Our results imply that WEF should refine GCI to include national culture so that GCI can become a much better predictor of economic growth. We make contributions to the community and society by suggesting ways to make GCI a better measurement of economic growth.

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