2.1 Macroeconomic stability

 Data for GDP growth and inflation (implied GDP deflator), exchange rate changes and nominal short-term interest rates come from the OECD Economic Outlook database, June 2002.  Volatility is measured by the standard deviation across the period.

 2.2 Openness to trade and foreign investment

 Trade data are taken from OECD Monthly International Trade Statistics, June 2002.

 Data on foreign direct investment stocks are taken from UN World Investment Report 2000. A foreign investment is classified as a direct investment if the foreign investor holds at least 10 per cent of the ordinary shares or voting rights in an enterprise and exerts some influence over its management.

 2.3 Prices

 Price comparisons are taken from the OECD publication - Purchasing Power Parities and Real Expenditures 1999 benchmark year.

 The source for the industrial gas and electricity data is the International Energy Agency.  Data used are comparisons of prices in national currency deflated by national GDP deflators, and exclude taxes, except for US and Canada.

 2.4 Unemployment

 Standardised unemployment rates and long-term and youth unemployment rates are taken from OECD Employment Outlook, June 2001.

 2.5 Diversity of employment opportunities

 Data used are National Statistics taken from the Labour Force Survey produced by ONS.

 The EU comparison data are taken from the 2001 European Labour Force Survey compiled by Eurostat. ELFS data relate to Spring and so potentially may include some seasonal effects (compared with annual results taken from the UK’s national LFS results) though these will be less significant when looking at changes over a number of years.

 2.6 Industrial action

 Data on working days lost are taken from ONS Labour Market Trends, April 2001. The original source for the number of days lost was taken from the International Labour Organisation (ILO) and the employee data from the OECD.

 2.7 Labour market regulation

 Data for 2.7.1 are taken from the International Institute for Management Development (IMD) World Competitiveness Yearbook, 2001. (See notes under 2.8)

 Respondents were asked the question whether labour market regulations are “too restrictive or flexible enough”. (This question is also included within Chart 2.8.2). In order to eliminate some of the year-to-year volatility of the surveys, results presented are the average of 1996 and 1997 surveys and 2000 and 2001 surveys.

 Data for 2.7.2 were taken from the US Bureau of Labor web site, and can be found in their publication: International Comparisons of hourly compensation costs for production workers in manufacturing, 1975-2000.

 2.8 The institutional and political environment

 The source used was the IMD World Competitiveness Yearbook, from 1996 to 2001. The IMD surveys the opinions of a panel of over three thousand top and middle management from 47 countries with a 110-item questionnaire. The survey is completed at around March of each year. A similar exercise is carried out annually by the World Economic Forum (The Global Competitiveness Report).  Until 1995 the IMD and WEF produced a joint report, after which WEF set up their own report with a slightly different compilation methodology.

 For business executive perceptions of how institutions and government policies support competitiveness two broad sets of indicators were selected. The figures presented are the simple average of the scores under these headings.

 For government policies the following indicators listed in that publication were chosen: the deterioration or improvement of the management of public finances; the incentive effect of real personal taxes; the incentive effect of real corporate taxes; the extent of tax evasion; the adaptability of government economic policies to a changing economic environment; the legislative activity of the parliament and its relation to the nation’s competitive requirements; and transparency - the government does not communicate its intentions clearly.

 For institutions those used were: the effect of the legal framework on competitiveness;  the appropriateness of the political system to today’s economic challenges;  the effect of the customs administration on the efficient transit of goods;   the extent of corruption;   public service and political interference;  are government decisions effectively implemented; is the law fairly administered and are people and property adequately protected.

 For business executive perceptions of government regulation, the following questions were used: does environmental regulation hinder business; is labour regulation too restrictive (the same question used in Chart 2.7.1); the extent of government price controls; do competition laws prevent unfair competition; bureaucracy and its effect on business development; and product liability as a constraint on business.

 In order to eliminate some of the year-to-year volatility of the surveys, results presented are the average of 1996 and 1997 surveys and 2000 and 2001 surveys.

 2.9 Quality of Life

 The Government’s Indicators for the Strategy for Sustainable Development in the UK are published by Department for Environment, Food and Rural Affairs (DEFRA).  They can found on the internet at:

http://www.sustainable-development.gov.uk/indicators/headline/assessment.htm

Last updated on 07 August 2002