Development of a national competitiveness index based on a structural equation model

Abstract

In this paper, we propose a national competitiveness index using raw Institute of Management Development (IMD) data and try to overcome a shortcoming in the IMD's own ranking system. The IMD world competitiveness ranking considers 20 factors to define an index, but it does not consider the structural relationships among various factors. We utilise a structural equation model to derive a national competitiveness index that reflects such structural relationships. We then reveal new rankings of world competitiveness. In addition, we conducted a comparison analysis by economy level and identified improvement points in terms of measurement variables as well as latent variables. Our work is expected to promote a new era of national competitiveness rankings and indices.

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