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CES VŠEM Yearbook

The Competitiveness Yearbook - the Czech Republic 2006–2007 has been published by two research teams – Centre for Economic Studies and National Observatory of Employment and Training.

The yearbook comprises a broad range of indicators enabling a comprehensive assessment of the Czech Republic position within the enlarged EU in terms of five pillars: institutional quality, structural competitiveness, innovation performance, and human resources quality, within the framework of macroeconomic stability and performance.

Growth performance and stability

The first part is divided into three chapters. The first deals with growth performance, its main sources and the real convergence to the EU average. The second chapter examines the changes on the demand side and macroeconomic stability, analyzed in terms of national saving and domestic investment with impact on external balance. The third chapter covers the nominal convergence in terms of  closing gaps in comparative price and wage levels.

Growth and supply side of the economy (Vojtěch Spěváček, Růžena Vintrová, Mojmír Hájek, Václav Žďárek): The factors are presented which led to the acceleration of economic growth in 2001–2006. Growth is measured both with the traditional indicator of GDP and alternative indicators of real income (reflecting the effects of terms of trade and income flows with the rest of the world). The process of real convergence (quite rapid in 2001–2006) is measured in terms of GDP per capita in PPS. The analysis of growth factors on the supply side takes into account the growth of labour, capital and total factor productivity and shows that the growth of the Czech economy was predominantly caused by the growth of total factor productivity.

Demand side and macroeconomic balance (Vojtěch Spěváček, Eva Zamrazilová): On the demand side the structural changes are analyzed together with the contribution of demand components to GDP growth. A positive change can be seen in the contribution of foreign trade. Special attention is given to private consumption and main factors which determined its development. The evaluation of macroeconomic stability is based on the relationship of domestic supply and demand and on the relation of national saving and domestic investment. The gap between investment and saving indicates potential danger due to the decline of saving rates of households and falling savings of government sector. External balance is increasingly influenced by foreign direct investment and the role of companies under foreign control.

Nominal convergence (Václav Žďárek, Růžena Vintrová): Nominal convergence is reflected in the closing gaps in comparative price and wage levels. The comparative price levels converge through two transmission channels: by inflation differential and through the nominal exchange rate appreciation. The second channel will disappear after the adoption of common currency. In this case certain danger of acceleration of inflation exists. The price level in the Czech Republic is substantially lower than in the countries with similar economic level. However, the increase of comparative price level in the Czech Republic was relatively steep in the last ten years. The chapter also analyses relative price levels in different commodity groups with special attention given to the tradables vs. non-tradables.

Institutional quality

The institutional quality part of the analysis is divided into two major chapters. The first is assessing quality of governance and the second one concerns conditions of doing business.  Institutional quality is measured with public expenditures and competitiveness indices. Evaluation includes wide range of characteristics and results are measured in relation with other economic and institutional indicators as tax burden, index of economic freedom or corruption.

Quality of governance (Milan Žák): Assessing and measuring governance quality is based on the data published in the World Bank project Governance Matters together with other, more specific resources. Aggregate governance quality index is based on the evaluation of voice and accountability, political instability and violence, government effectiveness, regulatory quality, rule of law and control of corruption. Specific attention is given to the measurement and evaluation of compliance with so called five principles of good regulation, and to the implementation of the related programme measures in public service in the Czech Republic (making use of EU and OECD methodology SIGMA). Specific problem of institutional quality in the new EU members includes the corruption control. The chapter also covers dynamics of institutional changes in the new EU members.

Doing business (Václav Šmejkal): The chapter presents results of World Bank survey undertaken within the project Doing Business, with special regard to the Czech Republic position. Doing business conditions are assessed in terms of regulation burden and its impacts on entrepreneurship and related indicators of tax burden and corruption. The evaluation includes ten key indicators (further divided into partial aspects): starting and closing a business, dealing with licenses, hiring and firing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts. The paper includes specific problems of the Czech Republic legislation, and related changes directed to their improvement. Specific attention is given to the opinions of Czech entrepreneurs collected in the field survey.

Structural competitiveness

This part is divided into three chapters. The first assesses the position of the Czech Republic with comprehensive indicators of micro and macro competitiveness. Furthermore, two structural aspects (industrial and regional) are applied to evaluate the performance and qualitative characteristics of the selected industrial groups of manufacturing and services and regions in the Czech Republic.

Comprehensive assessment of competitiveness (Anna Kadeřábková, Michal Beneš): Complex approach to the competitiveness makes at first use of the structural indicators for monitoring the Lisbon Strategy achievements. The second approach is based on the methodology of the World Bank with an emphasis on the knowledge economy pillars in a sound institutional framework (knowledge assessment matrix). Specific accent is put on the position of the Czech Republic within European Innovation Scoreboard and its key components, though the explanatory value of the composite indicator remains rather limited, especially in the new EU members. Finally, the results published by WEF and IMD are used for the competitiveness assessment. More specifically, the position of the Czech Republic is compared in with Finland.

Industrial competitiveness (Marek Rojíček): Analysis ranks industries in terms of a wide range of indicators, both performance and quality-based, such as productivity level and its growth, R&D intensity, share of qualified employees, export share, share of gross value added in foreign-controlled enterprises, output multiplier (indicating the intensity of industry linkages within the economy). Comparison is made by individual characteristics and average position in overall indicator of industrial competitiveness. Key competitiveness factors are enlisted in each industry, where manufacturing is explored in more detail. The key role is played by car industry with relatively favourable knowledge characteristics. Besides the level of individual industries, the analysis also includes groupings in terms of technology and knowledge intensity (though its actual level  remains low in the Czech Republic).

Regional competitiveness (Jaroslav Kahoun): Regional competitiveness is measured at level NUTS3 (there are 14 of them in the Czech Republic). Included variables are divided into the categories of economic performance, innovation performance and quality of life. Special emphasis is put on technology intensive industries and research and development inputs, foreign direct investment inflows per capita, and labour market duality characteristics. Attention is given both to the achieved level in the individual categories and their changes in time to identify regions which are catching-up, stagnating, falling behind and further improving their position.

Innovation performance

The fourth part is divided into three chapters. The first evaluates the inputs and outputs of innovation performance according to the main sectors of the national innovation system. The second chapter focuses on the characteristics of the business innovation performance and its effects and barriers. The third chapter evaluates the characteristics of the business IT development in the Czech Republic in the context of global trends in information society.

Inputs and outputs of innovation performance (Anna Kadeřábková, Michal Beneš, Karel Muller): The evaluation is based on the concept of national innovation system according to its inputs, specific infrastructural preconditions and outputs (scientific and technical performance). The analysis of inputs includes the characteristics national research and development system, describes the dynamics and structural changes of research and development sectors and specific problems of their internal structuration and mutual interfaces. The scope of inputs covers also broader factors influencing innovation performance, like the availability of the highly qualified experts, the level of scientific and technological activities, level and growth rate of government expenditures, cooperation between universities with companies, availability of venture capital.

Business innovation performance (Michal Beneš, Michal Pazour): The chapter evaluates the key aspects of innovation performance of Czech enterprises, particularly using the results of latest Community Innovation Survey (2003–2005). The types of innovation (including non-technical), innovation activities, their effects and hampering factors are studied more thoroughly. The attention is also given to the extent and type of cooperation in the innovation process and the significance of alternative information sources. The more complex view on the innovation inputs and outputs evaluates the structure of employees in terms of the prevailing learning models and their impact on the innovation mode. The analysis finishes with references to specific conceptual and methodological problems of statistical surveying and measurement of innovation.

Information society and business informatics (Josef Basl, Josef Pour): The chapter deals with the quality of informatics at three levels – at the level of the society, at the level of the ICT market in the Czech Republic and the level of informatics in firms. International comparison points out the key characteristics of the achieved  level of information society, for example accessibility of the internet to firms and individuals, using of e-business and e-government applications, etc. The second part evaluates the current situation and the expected development of the ICT market in the Czech Republic. It analyses only the supply side of information applications and all sorts of related services. The evaluation is based on ad hoc survey undertaken among the company and ICT managers. The last part deals with the quality of business informatics and its influence on competitiveness. The effects of business informatics are discussed and evaluated through the filed opinion survey.

Quality of human resources

This part is divided down into two chapters. The first chapter deals with lifelong learning. Adult participation in education is assessed, the barriers to participation are identified and training in enterprises is analysed. The second chapter focuses on human resources for knowledge-based economy. The attention is paid to employment structure, wage differentiation in the relation to qualification and to the globalisation of tertiary education.

Lifelong learning (Věra Czesaná, Olga Kofroňová, Zdeňka Matoušková): The first part of this chapter focuses on the adult participation in education in relation to their labour market positions, gender and occupation, the position of CR in the frame of EU-27 is assessed. The second part on the base of adult population survey identifies the most important reasons why the population do not participate in continuing education. These reasons are investigated according to the age, education, profession, place of residence and the income level. The third part analyses the willingness of firms located in the individual EU-27 countries to invest into employee training. The influence of a shortage of qualified employees on companies’ innovating activities and innovating companies’ approach to human resources development is also searched.

Human resources for knowledge economy (Věra Czesaná, Věra Havlíčková, Zdeňka Matoušková): The chapter is divided into three parts. The first one deals with the employment in qualification demanded occupation and in qualification-intensive sectors. Second part includes the analysis of wage differentiations among educational group and inside these groups. Average earning in high-tech manufacturing industry is compared with average earnings in manufacturing as a whole. The same approach is applied for knowledge intensive service sector. The third part aims at the analysis of mobility of students in the EU and focuses specifically on foreign students studying in the CR and Czech citizens studying abroad. The teaching professional’ opinions on including the student mobility as an obligatory part of curricula are contained, too.