The Main Drivers of Competitiveness in the EU-28 Countries
Mihaela Simionescu, Elena Pelinescu, Samer Khouri, Svitlana Bilan
Keywords:
competitiveness, human capital, innovation, FDI, panel data model
Abstract:
During the past few decades, globalization has dramatically changed the context of competitiveness
around the world. Considering the role of competitiveness in the development of the digital
economy, this paper aims to highlight the role of innovation, foreign direct investment (FDI),
and human capital in supporting competitive European economies. The research hypothesis
is that FDI, innovation, and human capital contribute to competitiveness growth. The paper
extends the Cobb-Douglas function by including other competitiveness factors in a panel data
framework based on the EU-28 countries in the period 2004-2018. The results indicate that GDP
per capita variation is explained by human and physical capital, FDI, and R&D expenditure.
Human capital plays a crucial role in economic development due to the innovation skills of
individuals, which improve the productivity of these factors. Capital formation also makes a
positive contribution to economic growth. The empirical evidence suggests that the changes in
the GDP per capita are explained by modifications in the labor force and capital formation, as
is described in the traditional framework of the Cobb-Douglas function. R&D expenditure and
FDI stock, however, also play a significant role. Moreover, human capital could determine the
adoption of external technology by absorbing new equipment and ideas. On the other hand, the
education index and capital formation showed a positive impact on GCI.
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 The Main Drivers of Competitiveness in the EU-28 Countries [PDF file] [Filesize: 1.08 MB]
 10.7441/joc.2021.01.08
Simionescu, M., Pelinescu, E., Khouri, S., & Bilan, S. (2021). The Main Drivers of Competitiveness in
the EU-28 Countries. Journal of Competitiveness, 13(1), 129–145. https://doi.org/10.7441/joc.2021.01.08
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