A CLUSTER ANALYSIS ON SUSTAINED GLOBAL COMPETITIVENESS FOR EUROPEAN COUNTRIES

Abstract

The Global Competitiveness Index (GCI) developed by Xavier Salai-Martín, in collaboration
with the World Economic Forum, has been measuring the factors that drive the growth and
prosperity since 2005. This paper focuses on grouping the European nations according to global
competitiveness. It uses the hierarchical and K-means cluster with a particular focus to examine the
grouping of countries from 2008 to 2017 and to reduce the complexity in examining the relationship
between European countries. The drivers of competitiveness are grouped into 12 critical pillars,
namely, institutions, macroeconomic environment, infrastructure, higher education and training,
health and primary education, goods market efficiency, financial market development, labor
market efficiency, technological readiness, market size, business sophistication, and innovation
respectively. The mean score of Europe during the study period was 4.7 and 40% of the European
countries were found to be above the average and have been consistently performing well ahead of
the average on competitiveness. This study can be generalized to other nations as well as compared
with other indexes for exhaustive research that can be useful for policymakers.