The entire database, is currently available for internal World Bank users at <u>http://go.worldbank.org/4CGO9A06B0. After clearance by the World Bank and Banque de France, it</u> will be placed on an externally accessible website. Country-specific fact-sheets and short analyses on various topics will also be made available online in the course of 2014. It is useful to clarify how this database fits into the existing data landscape. No other database proposes cross-country and time-varying measures (quarterly frequency) of geographical and sectoral specialization and export performance netted out of compositional effects, as our data set does. The information on export performance netted out of compositional effects can be related to competitiveness, a topic on which data sets available to the public exist. As discussed in the introduction, to the extent that we assume that country A is more competitive than country B if its exports and market shares increase over and above those of countries having the same composition of exports, our measure of export performance can be viewed as a proxy for countries’ trade competitiveness.<sup>10</sup> World market shares are often used by policy analysts as a main indicator of trade competitiveness (see Box 1). These however are criticized on the grounds that they are affected by other factors, including geographical and sectoral specialization. Our indicators improve on this front. By contrast, our indicators are not immune to another criticism applicable to most existing measures of trade competitiveness. Namely, existing measures of trade competitiveness (i.e. price and cost measures, market share changes, etc.) lend support to a view of competitiveness as a zero-sum game, where the improvement of a country can be seen as corresponding to a loss of opposite sign by other countries. This is the case because such measures are all expressed in relative terms. Therefore they neutralize global trends. Also our measure of competitiveness is expressed in relative terms. However, to account for developments at the world level, in our database we report the evolution in world export growth. Moreover, in illustrating results in a graphical form, we account for the relation between world export growth and a specific country’s performance by measuring the deviation of the latter from the world average (see Figures 1-6 of this paper).

# **Box 1: Defining and measuring competitiveness at the macro-level**

A large number of concepts of competitiveness have been proposed both in the economic and business literature. Micro-economics based interpretations relate it to productivity. These are relatively well established concepts and easy to quantify, in particular at the firm or sectoral level. Macro-economic based definitions are more broadly defined but also less established and more controversial.

A first interpretation of competitiveness at the macro level is that of an aggregation of the micro-economic concept based on productivity. For example, Dollar and Wolff (1993) define an economy competitive if it “harbors a large number of internationally competitive industries and enterprises”. This definition validates the view that domestic competitiveness can be assessed by looking at a country’s performance in trade and direct investment abroad, as competitive economies will necessarily perform strongly on exports and direct investment. This explains why trade indicators have been used extensively as a measure of competitiveness. For example the well known use of measures of Revealed Comparative Advantage less diversified countries, as the latter are subject to larger variability of export growth. But differences are reconciled by computing the corresponding percentage growth rate. In table 1 we report for the BRICS a 11.7% annual export growth (the actual record growth is 11.1% annually). For the OECD the growth is equal to 4.6% instead of 4.5%. 10 Obviously competitiveness goes beyond exports (Krugman, 1994). However, exports are a useful lens to look at a country’s overall competitiveness. Trade data have the advantage to provide very detailed but internationally comparable information, which can be useful not only to assess countries’ relative competitiveness in exports but also overall: if a country is competitive in its exports, it will presumably be competitive on the domestic market as well.

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