André Wolf

Towards a new measure of a country’s competitiveness: applying canonical correlation

Purpose – This paper aims to develop and implement a new approach of ranking countries according to their level of economic competitiveness. Design/methodology/approach – Competitiveness is conceptualized as the degree of participation in global integration, measured by the levels of exports, capital inflows and immigration. Based on a wide range of development indicators, composite indicators are constructed by means of a principal component analysis. In turn, these composites enter a canonical correlation analysis and estimated canonical weights are used as weights in the calculation of index scores. Findings – Measures of institutional and political quality are shown to be most closely connected to a country’s ability to export and to attract foreign factors of production. Inflows of foreign capital turn out to correlate much less with our weighting composites than export volumes. Research limitations/implications – Regarding prospects for future research, a broad range of further applications of this ...