Published online by Cambridge University Press: 02 January 2018
The term competitiveness is widely applied as a catch-all for investor-friendly policies and institutions. This article argues that sloppy applications of the term ignore the possibilities of policy tradeoffs and varieties of institutional choices. Popular conceptualizations of the term describe three discernible clusters of economic policies and institutions. One cluster captures openness to international trade; a second gauges regulatory impediments to private sector competition; a third refers to public sector investments in human capital, security, and infrastructure. This essay develops three empirical indexes to operationalize these clusters and shows that these concepts are not only theoretically but also empirically distinct. In particular, the correlation between these measures is not especially high in a sample of Latin American countries. The larger economies in the region tend to be more competitive on the regulatory and public goods dimensions but fall well behind smaller economies in terms of external competitiveness, broadly conceived.