The necessity of a “high - PDF document

2. The necessity of a “high-roa
2. The necessity of a “high-road” strategy 2 Policy Brief No. 29, January 2016 Figure 1: The WWWforEuropeconcept of competitiveness Source: Aiginger BärenthalerSieber Vogel: Competitiveness under New Perspectives, WWWforEurope Working Paper no 44, October 2013.The necessity of a “highroad” strategyThis redefinition of competitiveness is not merely an analytical or theoretical detail. It changes the policy conclusion to be derived from the everpresentcall for the competitiveness of a country. Rich countries have to pursuea "highad strategy", defined in this paper as built on (i) quality, sophisticated products and productivity as competitive advantages, as well on (ii) capabilities as drivers of competitiveness. For capabilities we rely in part on those known in theories of economic growth (education, innovation, instittions)but add social investment (activating labour market policy, retraining) and ecological ambitions (high standards, emission taxing). In contrast to the otenheard assumption that welfare spendingand logical standards are detrimentalto the perforance of an economy or locationthe evidence rveals that social investment and ecological ambitions if pursued by strategy and implemented intelligently can increase the performance of firms and coun-triesheshould not be condemned as rising costsbut as drivers of long run performance. The objective of a "highroad strategy" is to deliver high incomes, ecological excellence and ploymentand to limitincome differences. A lowroad strategy (builton susidies, tax exemptions, protection and devaluationof currency) is not feasible for richcountries, since low and middle income countries can always retaliate.The concept of competitiveness as the abilityto dliver Beyond GDPgoals wilnow be used to assess the deficits and strengths of Europe relative to the US, and tothen evaluatEuropean countries, includingAutriaEuropean competitiveness: empirical resultsWe now apply the concept to present a short evalution of the competitiveness of Europe relative to the US, to reveal Europe’s weakness and strength, specifcally in non cost elements, then we report which European countries perform better.Comparison between EU and USWages as well as productivity in the EUare, on aerage, aboutone third lower than those in the US, so that overall unit labour costs are similar. Productivitydifferences are smallerfor the total economybut lager formanufacturing.Regarding technologydriven and skillintensive eports, Europe no longer trailsthe US; insteadEuropeenjoys trade surpluses in all sophisticated sectors, while the US has trade deficits. Europe has a far larger export share inecoindustries and renewablesAiginger ¬BärenthalerSieber ¬Vogel, 2013 and 2015.However, Europelags behind the US in R&D expendtureand higher education. On the other hand, Europe invests more in early education, vocational training and active labour market policies. As far as institutions are concerned, Europe has stricter rules for labour and business, lower regulatory quality, and Rule of Law that s generally considered less stringent than in the US(tough goals, butless adherence to leislated objectives. On the other hand, the quality of the parliamentary systemis better in Europe. Environ-ental ambition is more pronounced in Europe, as LabourCapitalResourcesTaxesLabour (Y/L)Capital (Y/C)TFPExportsValue addedPricesegmentQuality as dominant modeCostsProductivityStructureCapabilitiesTraditionalNewPerspectivesOutcomes competitivenessQuality competitivenessInputoriented evaluationOutcomesoriented evaluationInnovationEducationSocial empowermentEcological ambitionInstitutionsClustersGDP/capitaEmploymentBeyondGDP goalsIncome pillarSocial pillarEcological pillarLife expectancyHappinessWorklife balancePrice competitivenessBalanced budget& current accountConstraintsUnit labour costsWage share 4. Austria is a success model at a crossroads Policy Brief No. 29, January 2016 3 shown higher environmental taxes, more

recycling, a higher share of environment
recycling, a higher share of environmentrelated technology patents and a high share of organic farming.Summarizing all five capability groups, as mentioned above urope lags behind in R&D and higher eduction the two most important indicators for frontier countrieswhile it leads n indicators that are impotant for the transition to a more socially inclusive and ecologically sustainable economy.The traditional output indicators put the USin the leadper capita GDP (less in GDP per hour) and uneployment is lower. Largepublic deficits and debts, as well as a negative currentcount balance in the US presentlimitationstothe successof the USFor eyondGDPgoals, the picture is different. The US still leads n the income pillarAs for the social pillarsthe US trails n poverty prevention and equality but has lower youth and longterm unemployment, thus yielding mixed overall results. The US clearly lagsbehind urope n the ecological pillar with the exception that rules are adhered to more closely if legislated (e.g. NOx emission).Regarding comprehensive indicators, Europe does better n life expectancy, while selfreported life satifaction, worklifebalance and happiness are higher in the US.IntraEuropean resultsAs far as individualcountries are concerned, Den-mark, Sweden and Finland excel in capabilities, cifically in education and R&D expenditures. Gemany and France receivea top position in innovation and social investment, but a less favourable one in education and institutions.Cost positions do not really determine performancewhich is a warning to all analysesthatoveremphasise low costs as strategy for highincome countries. Thassessment is differentfor Southern European coutries whoselabour cost increases were higher thanproductivity in the years before the crisis. The results for Greece, Italy, Romania and Bulgaria furthermore show that outcomes could considerably improve if trust in governance and institutions improved. Using the definition of competitiveness as the ability of a region or country to deliver Beyond GDPgoals should be able to stop the critique that the term competitivenes(Krugman, 1994is dangerous anmisleading, as well as the critique that competitivnessis a concept only applicable at the firm level. It is now closely linked to the economic performance of a region and allows analysinghow rich countries can successfully pursue a highroad strategyThe empirical results show that countries going for a high road, such asthe northern European countries (but also Switzerland)can successfully compete by means of sophisticated capabilities. Social investment and high ecological standards are not aurdenowcost countries do not perform well in the long run.uccess can and should be measured by broader goals (Beyond GDP goals) instead ofnarrowly eco-nomic ones.Austria is a success model at a crossroadResults so farFor Austria,ost competitiveness is validatedby the indicators. Unit labourcosts lie within theaverageof the 28 EU countries,per capita ages for the total economicare the fifth highest, and Austriais therefoa (moderate) highwage country. oweversince productivityDP per head) is also high(rank 8 of 28), eragelabunit costs liein the middlerangethe manufacturingsectorthe productivity lead is even higherthan the wage premium, which is flectedin a large and ratherstable share of manufaturing. AndAustriahas a large surplus in currentcounts, which is an overall mirror of current price competitiveness.Production structureis still dominatedby mainstreamindustriesweak point in Austriacompetitivenesis that Autriais not as strongin thecapabilities important for leading countrieseneralevaluation of the eduction system revealimportant weaknesses. The Pisa ingshowmedium ranks for secondary schoolanduniversityrankings and evaluations disclose the lack of top universities. . High shares of labourintensive industriesand lowskilled strieshavdecinedhistoricallylow shares of technologyintensive industries have in-creased. Neverthelesselativepositionsin highskill and tech industries arenot as largeas is to be anticip

atedfora rich countryThe inheritance of
atedfora rich countryThe inheritance of individual capabilities persistswhile preschooltrainingis low. On the positive sidethe indcatorshowthat vocationaltraining is excellent anapplied universities are thrivingEcological ambitions were high up to the year 2000, but since then Austria has lost groundin energy and resource efficiencyanditsmoveantage. Texport potential forn-vironmental producthas therefore no longer befully utilisedAs faras outcome competiveness is concerned, Autria's position can beassessed as rather positive. Gross per capitancomes are high, even whenestimatedaccordingto eyond GDP criteria (deductingdeprciation)but high taxes and specifically hightaxes on labourducethe disposable income of workersand per capita consumption. Social indicatorsillustrateited income inequality, low povertyandunemploment. The goodposition inenvironmental indicators(and slow progresshas already bementioned. Mainstream industries can be defined as a residual group of branches which neither stick out by a particularly large capitalor labor intensity nor by a particularly high share of R&D or marketing compared to turnover. Accordingly it is a quite heterogeneous group including for example a large part of mechanical engineering. 5. Looking ahead 4 Policy Brief No. 29, January 2016 Evaluatingthe three pillars (income, social and eco-logical) togethergives a top positionThis is also con-firmed by rather conventional indicators. Real eco-nomic growth (GDP) has been higher than in most other countries: between 2000 and 2013 average growth was % in Austria compared to 1.0% in the Euro areaand in Germany.Figure: Growth of real GDPourceIFO (December2015).Europemarkets break awayThe Austriasuccess model has more recently beenunder strainn the past for years conomicgrowth has been below 1and over the past to years low the European average. From year to yearAustriahas slid downin theinternationalcompetitiveness rat-ing. The indicatorsleading to this owngrade are the large public sector, high taxes, cumbersombureauracyinflexible labourmarkets. Some of these agumentare real detractors for Austriandynamics, but in principle they are not new. However,other coun-ries are proving in these areas and nw compettors have entered Austria’s markets.In the last four years Austrian exports havenot growas strongas in the past. One reason for this is that in the past Austria profited from the opening of newfastgrowing marketin the neighbourhoodfirst the adjacent countries Hungary, Czech Republic, SlovakiaandSlovenia, then theother new member countries SouthEasten Europe. The Black Sea regionand former Soviet countries would have been the next marketto boost exportsAustria started increasingports in theseregion, but hey are nowhit by political and economic problems, as are exports toNorthern Africa. In light of these developments theAustrian government’s goal toregain market shares in Iranfor exampleafter the phasing out of sanctions has startedis a very important initiative for regional divesification.Consumptionhas becomeless dynamic in the more recentyearssince real income per worker has clinover the ast six years. Wage increaseslooking acceptable and sometimes even tohigh for firms, tuned out as losses in real disposable income, since the inflation rate in Austria is nowhigher than in other countriesand progressive income taxes take a larger shareof gross incomes. Investment is sluggishsince capacities are not fully utiled and anticipated market growth is low. Public investment is also lowsince budget deficits hve to be cut, and public expenditures are not shifted from past prioritiesand administrative expendituresto ftureoriented categories such aseducation, innovtion jungles and the greening of the economy. Thecompetencejingle between the differentlayers ofgovernment not streamlined; thisleadto inefficien-ciesand high costs for firms.Past strengthdo not sufficeThese mainlydemandside elements which deceleate short and medium term growth

in Austriapoint tothe problem that the s
in Austriapoint tothe problem that the structureand capabilities on which Austria´s success is built readequate or even excellent for medium income countrbut not suffcient for top position.Austria has excellent voctional training and an education system thprovidmedium skillsExpenditureson researchand deveopment werecatchingwith leading countries, but there are only few technology segmentsin which Autria is leading. Expenditures are far from the planned frontier trajectory. Austriais losingground in innovation rankings, due to the persistentlack of venture capitalLooking aheadand low shares of researches in technical disciplineAustriaBased onthis situationit is crucial to design a reform strategy with whichAustria canregain its lead in in-come dynamicsThishas to be developed in an ronmentofincreasuncertainty and in whichnew competitors are pursuingAustriaformer position as provider of medium and top medium quality.Regaininga top positionrequires deep reforms in the education system, starting with higher expenditures and better monitoring of preschooleducation. Cu In November 2015 Austrian government started a reform of the edu-cation system improving the autonomy of schools, which was one of the weakest in Europe, and streamline school administration.Recent initiatives of the Austrian Federal Ministry of Science, Rsearch and Economy to establish a Business Angel Funds, improve financing of small and medium sized firms, and venture capital as well as the Cleantech Program try to improve this weakness see http://www.bmwfw.gv.at/Presse/AktuellePresseMeldungen/Seiten/MitterlehnerMahrerÖsterreichsNationalstiftungfördertinternationaleStartupProgrammmitvierMillionenEuro.aspxand http://www.bmwfw.gv.at/Wirtschaftspolitik/Standortpolitik/Seiten/Information_Alternative_Fruehphasenfinanzierungsinstrumente.aspx. 100105110115120125200020012002200320042005200620072008200920102011201220132014201520162000 = 100GermanyAustriaEuro area2000/20162013/2016Austria24.2%2.9%Germany19.6%4.8%Euro area17.6%3.9% 5. Looking ahead Policy Brief No. 29, January 2016 5 rentlyAustriabelongs tothe countries with the highestinheritance of life chances:parental incomeregionand family background determineeducationn-comeandlife chances. Even lie expectancy is dpendent on the type and durationof education o-senAustrians with university degree live three yearslonger on average than those with only a primareducation.The fact that one fifth of young people cannot read a comprehensive textis dramatic evdence othe failureof the education system. The cpabilities of migrants have to be utilismigrants (n-cluding the second generation and refugees) have to be integrated in schools, society and labouras quickas possible, that the advantages of an increasing labourforce can be usedfor welfare generationAustria has to go for a frontier position in innovation. This not only meanthat pubexpenditureson R&have to be prioritisedin the long periodof budgetary strainsaheadrivate money also has to be mobilised. Public research grantshave to be tenderedcompettivelyand clustered in promising areasof basic and applied resear. Young andinnovative firms have to ainaccess to venturecapital and crowfinancingUniversitieshave to become excellent in teaching as well as in research.A smarter and more efficient public sector has to serve the needs of the citizens and the conomy. Up to noweach new task has beenadded to the prevousone,resulting in a public sector steering 52% of the economic output (includingtransfers). Table1:LowRoad vs. HighRoad StrategiesThe wrong assessment for Europe and AustriaThe availability of new energy sources, especially liuefied gas and gas extracted via new technologies such as frackinghas caused US energy prices to plummet and has beenregarded as a chance to vitalise US manufacturing. Spillover effects to Europe exists US coal is now exported. For this reason and since European Carbon Pricing has broken down, coal

is increasingly used in Europe (substitu
is increasingly used in Europe (substituting gas and limiting the chances of renewables). nergyintensive industries are calling for Europe to match the US's now amplifiedcomparative advan-tage in energy prices: Europe should copy the US in exploiting similar cheapenergy sources (such as fracing for gas). AndEurope has already been assisting its energyintensive industries with free allowances for CO2 emissions. It has also postponed restoring the CO2 emission trading system or taxing fossil fuels and kerosene.If the car industry does not meet standards, planned or even legislated emission limits are etended. Tests which areknown to be unrealistic, are continued.As previously reportedAustriahad top perforance in ecological ambitions up to 2000 and has since lost groundaccording tomany indicatorst has also failed to achieve itselfproclaimed Kyoto goal.It is noahead in developing automotive parts for thealternative engines, which will dominate the car in-dustry in ten years after decarbonisation strategies will be implemented.he better alternativeHigh ecological standards are often feared by firmsthey are pected to reduce cost competitivenessTaxesfor gasoline are opposed by consumerssince they reduce consumption choiceshis need notbe the case if the higher ecological ambitions are iplemented in a consistent and wellcommunicated longrun strategy. Higher costs for firms can be copensated by higher support for research orbetter training of the labour force in applied universities or vocational schoolsThe higher cost of gasoline for consumers can be compensated by reduction in labour taxes and social contributions. If this is donedynamic advantages accrue: firms will raise energy and rource productivity, and this willsave emission taxes or ex post expenditures for environmental pairs. Consumers will choose a more energyefficient car, switch to public traffic or to cars with alternative engines. They may carsharinstead of buying a carhewill invest in better insulated house(low energy or even energy plus housing). Reducing ecological standards will lower costs in the short run, but increase them in the long run.Economic analystshavelong addressd thefirstmoveradvantagesof “sophisticated” consumers and ambitious environmentstandardsPorter, 1990; Stern, 2007. The firstmover incurshighercost(which could be partly coveredor lowered by govern-mentCosts of new technologies can rapidly decline with a prudent public procurementpolicyFavouringlongsolutions leadto a higher potential for eportsIn principleEuropean industrial policy has two options forddressingthe challenge of lower US energy costs: first, to try and lower its own energy costs; and seondto boost energy efficiency and to reduce costs of innovation and skill upgrading (if improvements in energy efficiency alone cannot bridge the cost diference). The first answer follows the logic of 'old' in-Low-Road StrategyHigh-Road StrategyCompetitive advantageLow costs (wages, energy, taxes) and standardsQuality, productivity, product sophisticationGrowth driversSubsidies, dual labour market, inward FDIInnovation, education, universitiesAmbitionsCost advantage, flexible labour, long working hoursSocial empowerment, ecological excellence, trustInstrumentsProtectionism, devaluation (external, internal)Business environment, entrepreneurship, dialogueObjectivesCatching up in income, elimination of disequilibriaBeyond GDP goals, three pillars 6. Summary 6 Policy Brief No. 29, January 2016 dustrial policyalong a low road path. If input costs are too high, an attempt should be madeto get cheaper inputs or subsidise the firm. The second answer is to try to increase productivity and/or to foster factors which increase tomorrow's competitive advantages, specifcally those fitting the longrun goals of the society. This is the core of the “new” industrial policy along a high road pathThus instead of copying the low energy price strategyof the US, Europeand Austriaas one

of its richest countriesshould go for t
of its richest countriesshould go for top energy efficiency and renewable. And if a cost difference nevertheless mains, firms should get cheaper funding for R&D and be provided with a highly qualifieworkforce throughlabour market policy, retrainingand improvededuction. Empirical evidence shows that Europe trails the US in innovation and top universities, and Austria does not follow its frontier strategy in innovationAt the same time,the manager surveyshow that highly qualified work force and innovation determine the longrun success of firms.SummaryAustria has successfully claimed a leadingposition in Europe over the past decades. GDP per capita is among the top five countries in Europe,unemploment is low, andthe currentaccount has a persistent and large surplus. Austria is competitiveas revealed by outcomes. On the input side, wages are above averages isproductivity, so that cost competitivness is also given. ConsequentlyGDP has increased by 23.7% ince 2000 (cumulative 2000/16).Since 2013growth rates in Austria have beenbelow 1%. In the last two years and in the forecast for 2016 and 2017GDP growth in Austria isalso lower than in the euro area. One reason for this is that market shares in theworld market are decreasing and neighbouringcountries specifically prospective new markets in southeast Europe and theBlack sea area have broken down.xports to Germany are sluggishsince Austrian firms (e.g. in the car industry) are being replaceby newcomers asproviderof medium tech products. Deeper roots are that Austria harelied on incomes “rising with the water(market growth) with-out strivingfor excellence, deep innovationand smart differentiation into related product markets.And thconcentration of Austrian exports to the low growing European market is still toolarge.In this situationAustria has to develop a new strategy for sustaining a good position achieved and regaining economic dynamics and high employment. Such a strategyhas to boost innovation by increase public and private funds even in times of budget consolidtion. Welfare system should be reformed from the fo-cus of protection to an investment approach (incluing preschool education and retraining for elder peo-ple), ecological standards should rise continuously and Austria should try to become a leader in energy efficiency renewables and decarbonisation. Following the successful Paris Summit in December 2015 new ifrastructure and new houses should be built only with ero or plus energy, and cars, busses and trucks should radically reduce emissions and gradually switch to aternative engines. The country and the industry taking the lead in decarbonisation will profit, those lagging and hesitating will have the costs. Increasing auton-omy of schools should be implemented quickly, aministration further streamline, the school system should serve better than now to eliminate differences in life chances according to income, region and gender.Such a strategy is currently ing developedby WIFO under the heading of “Europe 2025”. It should boost the capabilities important tofrontier countriesand make social and environmental ambitions compatible withhighroad” competitiveness. Such a strategy has been worked out for Euroby 33 research teams under the leadershipof WIFO in the WWWforEurope project. Designing a new growthpath for Europeo-vidmany reform options for Europe as well asfor Austria.ReferencesAghion, Ph., Boulanger, J., Cohen, E., Rethinking IndustriaPolicy, Bruegel Policy Brief, 04/2011.Aiginger, K. (1998), "A framework for evaluating the dynamic competitiveness of countries", in Structural Change and Economic Dynamics, 9(2), pp. 159Aiginger, K. (2006), "Competitiveness: From a Dangerous Ob-ssion to a Welfare Creating Ability with Positive Externaities", Special Issue on Competitiveness, Journal of Indutry, Competition and Trade, 6(2), pp. 161Aiginger, K. (2012), "A systemic industrial policy to pave a new growth path for Europe”, WIFO Working Paper 421/2012.Aiginger, K., BärenthalerSieber, S., Vogel, J., Competitiven

ess under New Perspectives, WWWforEurope
ess under New Perspectives, WWWforEurope Working Paper no 44, October 2013.Aiginger, K., BärenthalerSieber, S., Vogel, J, Competitiveness of EU v.US, WWWforEurope Policy paper,no 29, http://www.foreurope.eu/fileadmin/documents/pdf/PolicyPapers/WWWforEurope_Policy_Paper_029.pdfFagerberg, J. (1988), "International Competitiveness”, Ecnomic Journal, 98(391), pp. 355Fagerberg, J., Srholec, M., Knell, M. (2007), "The competitivness of nations: why some countries prosper while others fall behind", World Development 35(10), pp. 1595Fleurbaey, M., (2008), beyond GDP: Is There progress in the Measurement of individual Wellbeing and Social Wefare?, August 1, 2008. http://www.stiglitzsenfitoussi.fr/documents/Beyond_GDP.pdfHemerijck, A. (2012A), Changing Welfare States, Oxford: Unversity Press, 20Hemerijck, A. (2012B), "Retrenchment, redistribution, capactating welfare provision, and institutional coherence after the Eurozone’s austerity reflex”, Sociologica, 1, doi: 10.2383/36893.Hölzl, W., Reinstaller, A. (2011), "On the heterogeneity of setoral growth and structural dynamics: Evidence from Autrian manufacturing industries”, Applied Economics, 43(20), pp. 2565 6. Summary Policy Brief No. 29, January 2016 7 Janger, J., Hölzl, W., Kaniovski, S., Kutsam, J., Peneder, M., Reinstaller, A., Sieber, S., Stadler, I., Unterlass, F. (2011)"Structural Change and the Competitiveness of EU Meber States”, WIFO, Vienna.Ketels, Ch.H.M. (2015), Competitiveness and Clusters: Implcations for a New European Growth Strategy, WWWfrErope Working Papers, Issue 84, February 2015.Ketels, Ch.H.M., Protsiv, S. (2013), "Clusters and the New Growth Path for Europe”, WWWforEurope Working Paper No. 14.Köppl, A., KletzanSlamanig, D., Köberl, K. (2013), "Österreichsche Umwelttechnikindustrie, Export und Wettbewerbsfhigkeit”, WIFO, Vienna.Krugman, P. (1), "Competitiveness: A Dangerous Obsesion”, Foreign Affairs 73(2), pp. 28Leoni, T., Welfare state adjustment to new social risks in the postcrisis scenario. A review with focus on the social ivestment perspective, Issue 89, Number of Pages: 44, March 2015.OECD (2011), "How's life? Measuring wellbeing”, OECD Bet-ter life Initiative, Paris.Peneder, M. (2001), Entrepreneurial Competition and Indutrial Location, Edward Elgar, Cheltenham, UK.Porter, M.E. (1990), The Competitive Advantage of Nations, Free Press, New York.Porter, M.E., Rifkin, J.W. (2014), An Economy Doing Half its Job, Findings of Harvard Business School's 201314 Survey on U.S. Competitiveness, September 2014.Stern, N. H., (2007), The economics of climate change: the Stern review, Cambridge Press university.Unterlass, F., Reinstaller, A., Vogel, J., Friesenbichler, K. (2015), “The relationship between export and technological specialisation profiles across EU Member States and rgions and the identification of development potentials”, Background report for the European Competitiveness Report 2015, European Commission: DG Growth.Stiglitz, J.E., Sen, A., Fitoussi, J.P. (2009), "Report by the Cmission on the Measurement of Economic Performance and Social Progress”, Paris.WWWforEurope, Welfare, Wealth and Work for Europe: Europe moving towards a new path of economic growth and social development http://www.foreurope.eu/.Autor:Karl AigingerLeiterÖsterreichisches Institut für WirtschaftsforschungTelefon: +43 1 7982601 Email: Karl.Aigingerwifo.ac. Impressum:Die Policy Briefs erscheinen in unregelmäßigen Abständen zu aktuelen außenwirtschaftlichen Themen. Herausgeber ist das Kompetenzentrum „Forschungsschwerpunkt Internationale Wirtschaft“ (FIW). Das Kompetenzzentrum FIW ist ein Projekt von WIFO, wiiw und WSR im Autrag des BMWFW. Die Kooperationsvereinbarungen des FIW mit der Wirtschaftsuniversität Wien, der Universität Wien und der Johannes Kepler Universität Linz werden aus Hochschulraumstrukturmitteln gfördert.Das FIW bietet den Zugang zu internationalen AußenwirschaftsDatenbanken, eine Forschungs

plattform und Informationen zu außenwi
plattform und Informationen zu außenwirtschaftsrelevanten Themen. Für die Inhalte der Policy Briefs sind die AutorInnen verantwortlich. Kontakt:FIWProjektbüroo WIFOArsenal, Objekt 201030 WienTelefon: +43 1 728 26 01 / 335Email: fiwpb@fiw.at Webseite: http://www.fiw.at/ Policy Brief No 29, January 2016 Deficits and trengths in Austrian ompetitiveness Applying a new concept and a European perspectiveÖsterreichisches Institut für Wirtschaftsforschung (WIFO)The author is grateful to Elisabeth Christen, Klaus Friesenbichler and Michael Peneder for critical comments, Dagmar Gutmann and Eva Sokoll for research assistance.Policy Brief No 29, January 2016 1 Wettbewerbsfähigkeit wird noch immer oft rein kostenmäßig definiert (niedrige Löhne, Energiepreise). Für Industriländer und besonders Topeinkommensländer wie Österreich spielen aber Faktoren wie Innovation, Ausbildung und staatliche und nicht staatlicheInstitutionen (Sozialpartnerschaft, Vertrauen, schnelle Entscheidungen) eine wichtiRolle. Und der Wettbewerbserfolg sollte nicht nur an den erzielten Einkommen, sondern auch an sozialen und ökolschen Kriterien gemessen werden. Österreich istauch nach dieser breiteren Definition des Wettbewerbserfolges - gemessen an der Erreichung von Beyond GDP Zielen - mittelfristig ein Erfolgsmodell. Die schlechteren Ergebnisse der jüngsten Vergangenheit erklären sich darausdass Österreich sich zu sehr auf jene Faktoren verlassen hat, die für mittlere Einkommensländer wichtig sind, und zu wenigxzellenz bei Ausbildung, Inovation und Ökologie gesetzt hat. Das soziale System diente zu sehr der Absicherung nd zu wenig der Investition in zukünftige Fähigkeiten und Qualifikationen. Der öffentliche Sektor finanziert vergangene Prioritäten und Entschedungsabläufe und besteuert den Faktor Arbeit viel zu hoch. Das Innovationssystem leidet nach guten Ansätzen in den letzen Jahren immer stärker an Budgetengpässen. Dem Ziel, ein europäischer Innovationsleader zu werden („Frontstrategie“) ist Österreich daher nicht nähergekommen. Exzellenz im Umweltbereich, bei Enrgieeffizienz und alternativen Enrgien werden zu wenig genutzt. Für eine Rückehr zum Erfolgsweg ist ein Konzept notwendigwie Österreichals Hocheinkommensland im Jahr 2025 auf einem „high road path“ wettbewerbsfähig sein kann und welche Reformen dafür nötig sind. IntroductionCompetitiveness has been defined in manydifferentwaysover the past decades, starting with a narrow definition of costcompetitivenessthatfocussed on input prices (labour, energy costs, and taxes). This wasfollowedby a more balanced evaluation of costsand productivity and an assessment ofstructure, technoogy and quality as drivers of “input competitiveness”. The outcome of the process was measured by narrow economic goals, such asa balanced external acount and GDP or"outcomes". WWforEurope(Aiginger - BärenthalerSieber - Vogel,2013) takes thischange in the concepttwo steps futher:First, competiveness for industrialised coutries requires balancedcosts and productiityas a basis; however,in the long run, petitiveness depends on five capabilitiesinnovation, eduction, the socialsystem, insttutions and envmental ambitionCosts, structure and capabilities to-gether detemineinput competitiveness.Second, the success of an economy (outcome competitiveness) should be measured by neither a surplus in the balance of payment, nor GDPonly, but in broader eyond GDP goals. These consist of the three pillars: economic success, social inclusion and ecological sustainabilityFollowing this analysWWWforEurope The research leading to these results has received funding from the European Union’s Seventh Framework Programme for research, tecnological development and demonstration under grant agreement WWWforEurope no. 290647."proposes dingcompetiveness as the "ability of a country to dliver the eyondGDPgoals forits citizens today and tomorrow