||Tariffs|Trade-weighted average applied tariff|WEF|
|---|---|---|---|
||Openness<sup>f</sup>|Defined as the sum of export and import over GDP.|WEO|
|Pillar 8: Labor<br>market|CBR labor<br>regulation index<br>Women (% of<br>population)|Calculated as the average of sub indicators pertaining to laws and<br>regulations related to work time.<br>Women (% of population)|Cambridge Center<br>for Business<br>Research database<br>WDI|
|Pillar 9: Financial<br>system|Domestic credit to<br>private sector (% of<br>GDP)<sup>g</sup>|Resources provided to the private sector by financial corporations|WDI|
|Pillar 10: Market<br>Size|GDP_or_volume of<br>imports|GDP_or_volume of imports [dropped as highly correlated with<br>dependent variable]|WDI|
|Pillar 11: Business<br>dynamism|Cost to start a<br>business<sup>h</sup>|Number of days and procedures to start a business|Doing Business<br>database|
|Pillar 12:<br>Innovation<br>capability|Availability of latest<br>technology|The extent to which the latest technology is available in the country.|WEF|

_Note_ : a Results are robust to the use of other variables, incl. quality of roads index (WEF), which reflects the perceived quality of roads in the country; infrastructure (WEF), which reflects the perception of quality of infrastructure in the country (transport, telephony, energy). Also, an infrastructure index is used, built as weighted average of energy and internet use.

b Results are robust to the use of International Internet bandwidth (kb/s) per Internet user (Source: WEF), and to the use of infrastructure indexes (see previous Note).

c Results are robust to the use of other variables, such as average years of schooling (not shown). d Results are robust to the use of average tax rate (not shown).

> e The use of the regulatory index (component of Pillar 7) within the same model with government effectiveness (Pillar 1) and cost of doing business (Pillar 11) may lead to biased results due to collinearity. Alternative specifications are used to test the results, incl. the use of the extent of market dominance (WEF). f Results are robust to the use of other variables related to trade facilitation. For example, the Fraser regulatory trade barriers index is used (see Annex 4)

g Results are robust to the use of an indicator of credit market regulation (Fraser, see Annex 3). h See note e.

The classification encompasses determinants of competitiveness in terms of the institutions, policies, and factors that affect a country’s productivity, prosperity, and potential growth.<sup>4</sup> It brings together factors of production that build and boost the structural side (human capital, innovation adoption, energy, and Internet adoption); means of growth (financial intermediation, openness to trade); and reforms that affect institutional quality (government effectiveness, competition and regulatory quality).

The first competitiveness area—the first four pillars—deals with the enabling environment for business. Pillar 1 recognizes the importance of institutional quality for sustainable and strong economic growth. In this study it is proxied by the government effectiveness indicator (WGI). Pillars 2 and 3 refer to extensive and efficient infrastructure and ICT adoption; these are proxied by the use of energy and the Internet (WDI) in the baseline model. The extended version also uses the quality of roads and diffusion of broadband (WEF), respectively; the WEF infrastructure index; an infrastructure index, built as the average of energy consumption and Internet adoption, weighted equally. Pillar 4 stresses the relevance of macroeconomic stability to business development and thus growth.

> 4 Read more about the WEF methodology at reports.weforum.org.

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