The determinants of competitiveness and its indicators for the Spanish economy

The globalisation of economic activity and the incorporation of new technologies require a continuous drive to adapt on the part of economic agents. It is precisely the ability of an economy to adapt, and its medium and longterm growth possibilities that the analysis of an economy’s competitiveness aims to assess. However, competitiveness is an imprecise and controversial concept. Its definition and the instruments used to analyse it, have been changing over time, as new theoretical formulations have been developed. The focus of studies of competitiveness has been shifting from the traditional emphasis on trade and its most direct determinants (exchange rates, costs and prices) towards other considerations of a more structural nature linked to productivity and its determinants, which are ultimately responsible for welfare increases in an economy. This article analyses the competitiveness of the Spanish economy from a broad perspective that includes both approaches. This approximation is of all the more interest following entry into the euro area, because the traditional mechanisms for adjusting to external shocks have been modified, and the structural aspects of competitiveness have become more important. The article is organised as follows: following this introduction, section two outlines the debate in recent years regarding the meaning of competitiveness and certain indicators are defined that may be used for its diagnosis in the case of the Spanish economy. Section 3 analyses recent developments in competitiveness and section 4 offers the main conclusions.