Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
International competitiveness: The Real Exchange Rate • Nominal exch. rate x ratio of UK prices to foreign prices • Real exch. rate if: a) nominal exch rate rises b) UK prices rise relative to foreign prices • So real exch. rate = int’l competitiveness International Competitiveness: Labour productivity • Labour productivity – high productivity → ↓ ave. costs → ↓ relative export prices • Any increases in labour productivity must not be offset by higher relative unit labour costs or the competitive advantage will be lost Determinants of Relative Unit Labour Costs • Macroeconomic stability – encourages capital investment • Level of human capital – skills & education • Capital investment – UK has tended to under-invest in long-run infrastructure • Labour market flexibility – lack of competition in labour markets raise wage rates (workers bargain harder) – UK unemployment is very low Other contributors to Competitiveness • Quality • Innovation • Niche / specialty / unique area of expertise • Macroeconomic stability • Levels of corruption – how reliable / transparent is it when doing business with the UK? Gov’t Policy to Improve Competitiveness • Low inflation target for MPC – create stability & low cost pressures for industry – promote investment • Encourage flexible labour market – reduce work lost through industrial action • Reduce red tape & corp. tax (recent ↑ NI contributions have ↑ business costs) • Promote “knowledge driven” economy – education, lifelong learning, ICT training etc. • Tax incentives for R&D • Encourage firms to focus on quality, not just prices