DOES INSTITUTIONAL QUALITY ALWAYS ENHANCE COMPETITIVENESS? EVIDENCE FROM OECD COUNTRIES
DOI:
https://doi.org/10.64734/bjss.1-1-01Keywords:
institutional quality, competitiveness, productivity, rule of lawAbstract
The institutional framework that reduces economic uncertainty and guides the behaviour of market participants has become a critical determinant of countries’ long-term growth trajectories and their capacity to compete internationally. In a global environment characterised by the heightened mobility of capital and technology, cross-country differences in welfare are no longer explained solely by the availability of production factors, but increasingly by the quality of the institutional arrangements that govern their effective use. From this perspective, a well-functioning institutional framework that ensures orderly market operations, protects property rights, and lowers transaction costs emerges as a key foundation of sustainable competitive advantage.
The aim of this study is to empirically examine the impact of institutional quality on national competitiveness, focusing on 35 OECD countries over the period 2008-2017. Measures of competitiveness are drawn from the Global Competitiveness Index and the World Competitiveness Yearbook, while institutional structure is captured using the World Bank’s Governance Indicators. The empirical findings indicate that Regulatory Quality and Government Effectiveness exert statistically significant and positive effects on both competitiveness measures. By contrast, the Rule of Law variable is found to have a negative impact on competitiveness. Overall, the study demonstrates that market-friendly regulations and bureaucratic effectiveness support competitive advantage, whereas the compliance costs associated with excessive regulation and rigid legal procedures may constrain competitiveness.
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