Authors: Lionel Fontagné and Gianluca Santoni

The purpose of this report is to survey the related literature and tentatively clarify the concepts of competitiveness, with a policy perspective. The work revises competitiveness debate from three main points of view: macroeconomic, regional and microeconomics.For Micro-economics, competitiveness usually relates to firm productivity; as well-established concept it is relatively easy to quantify empirically, bothat the firm and sectorallevel. On the other hand, Macro-economic definitions are generally less well-established and more controversial.

The Macroeconomic section is devoted to drivers and measures of competitiveness from an aggregated viewpoint: innovation policy as productivity enhancing factor (especially in economic downturns); relative prices and relative costs approaches to evaluate country performance (Exchange Rates, Unit Labour Costs). A particular focus is dedicated to the external competitiveness, suggesting a newindex of export performance (Export Competitiveness Database) and considering the policy implications from the increasing incidence of international production networks (Global Value Chains).

The debate around regional aspect of competitiveness is faced in section 3, covering the main issues related to regional growth and competitiveness, the effect of agglomeration and local institutions as well as the relevant policies to enhance local economic performance.The Microeconomic perspective is covered in section 4. This section review the main driver of firm competitiveness, either internal to the firms or external (environment) and the most relevant channels through which micro-economic shocks propagate shaping aggregate outcome.

Competitiveness is basically a multidimensional concept that involves economic forces operating at different disaggregation levels. The review of relevant economic literature and empirical evidence proves the interaction strength of such forces and helps drawing sensible policy implications.