How to Calculate a Global Competitiveness Index

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Global competitiveness indexes measure the relative capacity of countries to provide their citizens opportunities to prosper. These indexes also provide a benchmark to measure the bureaucracy, management of resources and regulation institutions of countries. Global competitiveness indexes are used by businesses to decide which countries are more receptive to investment and more likely to provide a good return. The most used index is the Global Competitiveness Index, GCI, which is calculated by the World Economic Forum as a basis for its Global Competitiveness Report. Similar indexes include the World Bank's Ease of Doing Business Index and the Canadian Fraser Institute's Economic Freedom Index.

  • Decide which main factors determine the global competitiveness of a country. The factors you choose will depend on the economic theories, such as Keynesian economics, capitalism, globalism and consumerism, you subscribe to. For instance, the World Economic Forum basis its index on 12 main factors, which include a country's institutions, infrastructure, macroeconomic environment, health and primary education.

  • Find indicators of performance for each of the main factors you identified in step 1. The GCI uses over 110 indicators to assess and categorize a country's competitiveness.

  • Collect data from public and private sources to measure the performance of countries on each of the variables you chose in step 1. The GIC, for instance, is based on information collected in 139 economies and by polling over 13,500 business leaders.

  • Normalize the data collected for each indicator in all countries and assign a grade using a scale, such as a 1 to 10 grade system where 10 is the best performance and 1 is the lowest.

  • Add the grade a country gets in each indicator and divide by the number of indicators. This will provide an average grade for all indicators which is the equivalent of the country's competitiveness index.

  • Arrange the results of all the countries in the study in the order of their competitiveness index, so the countries with the highest indexes appear at the top of the table.

References

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