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Is the Global Competitiveness Index by the World Economic Forum a reliable tool for the design of labor market policies? Evidence from Latin American countries Cover

Is the Global Competitiveness Index by the World Economic Forum a reliable tool for the design of labor market policies? Evidence from Latin American countries

Open Access
|Dec 2023

Figures & Tables

Figure 1

Evolution of the GCI score for LAC, 2007–2017. GCI, Global Competitiveness Index; LAC, Latin American and Caribbean countries.Source: World Economic Forum. The Global Competitiveness Index dataset 2007–2017.
Evolution of the GCI score for LAC, 2007–2017. GCI, Global Competitiveness Index; LAC, Latin American and Caribbean countries.Source: World Economic Forum. The Global Competitiveness Index dataset 2007–2017.

Figure 2

Evolution of competitiveness in LAC across the 12 pillars. LAC, Latin American and Caribbean countries.Notes: Only Hispanic LAC countries are considered.Source: World Economic Forum. The Global Competitiveness Index dataset 2007–2017.
Evolution of competitiveness in LAC across the 12 pillars. LAC, Latin American and Caribbean countries.Notes: Only Hispanic LAC countries are considered.Source: World Economic Forum. The Global Competitiveness Index dataset 2007–2017.

Figure 3

Evolution of labor market performance in the selected countries, 2007–2017.Notes: The series subjective is an arithmetic average of the indicators’ scores obtained with business leaders’ opinions.Source: World Economic Forum. The Global Competitiveness Index dataset 2007–2017.
Evolution of labor market performance in the selected countries, 2007–2017.Notes: The series subjective is an arithmetic average of the indicators’ scores obtained with business leaders’ opinions.Source: World Economic Forum. The Global Competitiveness Index dataset 2007–2017.

Figure A1

GCI score range, 2017–2019. LAC, Latin American and the Caribbean countries.Notes: Score in 2017 is a backcast edition with methodology GCI 4.0.Source: Data for 2018 come from The Global Competitiveness Index (GCI) data set 4.0 2018, and data for 2019 come from the World Bank GCI 4.0: Global Competitiveness Index 4.0.
GCI score range, 2017–2019. LAC, Latin American and the Caribbean countries.Notes: Score in 2017 is a backcast edition with methodology GCI 4.0.Source: Data for 2018 come from The Global Competitiveness Index (GCI) data set 4.0 2018, and data for 2019 come from the World Bank GCI 4.0: Global Competitiveness Index 4.0.

Distribution of the GCI indicators by the data source (%)

PillarExecutive Opinion SurveyInternational organization

(soft data)(hard data)
1: Institutions5050
2: Infrastructure4258
3: ICT adoption0100
4: Macroeconomic stability0100
5: Health0100
6: Skills6733
7: Product market5050
8: Labor market6733
9: Financial system3367
10: Market size0100
11: Business dynamism5050
12: Innovation capability4060
Total4555

GCI scores and countries’ ranks in the labor market pillar for the selected countries, 2018

LACPeruColombiaDominican RepublicMexicoBrazil






Score*Rank**ScoreRankScoreRankScoreRankScoreRankScoreRank
Objective data
Female participation in labor force59.1456.98266.967100344.68977.349
Labor tax rate85.5595.83485.38385.38375.611255.3137
Redundancy costs57.5684.54073.67153.811062.59976.266
Workers’ rights68.8370.17157.711084.52856.71126688
Subjective data
Active labor market policies23.8717.912630.5921912025.310927.6105
Cooperation in labor–employer relations52.2650.710255.86956.763576146.6117
Ease of hiring foreign labor54.7252.56351.271536055.34840.6122
Flexibility of wage determination59.9776.31662.5855910368.65551.9124
Hiring and firing practices35.4731.512838.710939.310840.210520.8138
Internal labor mobility60.6265.62464.433681766.42229.2138
Pay and productivity40.6642.59642.59742.39845.18239.5113
Reliance on professional management50.6551.18151.67848.29153.86756.758
Pillar 8: Labor market55.3458.87257.98061.65154.410051114

The Survey and the country: percentage of firms with <100 workers in the selected countries, 2008–2019

200820092010201120122013201420152016201720182019
PeruThe Survey291216
The country98.498.498.398.398.398.598.498.498.498.099.198.4
1–1098.298.298.198.198.098.498.298.298.297.899.098.2
11–1000.20.20.20.20.20.20.20.20.20.20.10.2
ColombiaThe Survey52434349
The country a99.799.699.699.699.599.599.699.699.6
1–1094.593.692.992.792.392.293.092.792.7
11–1005.26.06.76.87.27.46.76.96.9
MexicoThe Survey15253338
The country99.599.499.599.599.599.499.499.499.499.399.3
1–1094.9693.9293.8093.7594.0993.8493.7893.6993.5893.5793.48
11–1004.535.505.665.705.415.525.615.705.815.765.83
Dominican RepublicThe Survey4946126
The country b95.496.596.996.395.397.297.297.398.1
1–1066.470.171.569.970.6 74.173.974.376.0
11–10029.026.425.426.324.723.123.323.022.1
BrazilThe Survey4202322
The country c99.199.299.199.199.199.199.199.199.099.098.999.2
1–1088.988.988.888.187.987.987.186.786.686.185.387.9
11–10010.210.210.311.011.211.212.012.312.512.913.611.3

Questionnaire of the Survey’s labor market pillar

IndicatorQuestion (“In your country...”)Answer
1. Hiring and firing practicesTo what extent do regulations allow for the flexible hiring and firing of workers?
  • 1 = not at all

  • 7= to a great extent

2. Cooperation in labor–employer relationsHow do you characterize labor–employer relations?
  • 1=generally confrontational

  • 7= generally cooperative

3. Flexibility of wage determinationHow are wages generally set?
  • 1= by a centralized bargaining process

  • 7= by each company

4. Active labor policiesTo what extent do labor market policies help unemployed people to reskill and find new employment?
  • 1= not at all

  • 7= to a great extent

5. Ease of hiring foreign laborHow restrictive are regulations related to the hiring of foreign labor?
  • 1= highly restrictive

  • 7= not restrictive at all

6. Internal labor mobilityTo what extent do people move to other parts of the country for professional reasons?
  • 1= not at all

  • 7= to a great extent

7. Reliance on professional managementWho holds senior management positions in companies?
  • 1=usually relatives and friends without regard to merit

  • 7= mostly professional managers chosen for merit

8. Pay and productivityTo what extent is pay related to employee productivity?
  • 1= not at all

  • 7= to a great extent

GCI labor market scores in 2007 and 2017

OverallSubjective


2007201720072017
Peru4.124.270.324.313.89–2.87
Colombia4.253.98–0.584.563.733.12
Dominican Republic4.133.62–1.194.733.562.14
Mexico4.093.77–0.744.563.921.82
Brazil3.963.68–0.653.983.362.35

Formalization policies in the selected countries

PeruColombiaDominican RepublicMexicoBrazil
Regulatory environmentDeregulation in hiring and dismissal
  • 1990s: Elimination of job security regulation; introduction of temporary contracts; reduction in severance payments; expansion of training and subcontracting schemes; weakening of collective bargaining institutions

  • 2002: Supreme Court rules in favor of the reinstatement of workers dismissed unfairly

  • 1990s: Elimination of the minimum term and extension of the maximum term of fixed-term contracts; introduction of temporary contracts; integrated wages; reduction in the cost of dismissing workers with indefinite contracts; expansion of training and subcontracting

  • 2002: Increase in the maximum working day by 4 hours; reduction in severance payments

  • 2010, 2012: Reduction of direct cost of hiring workers

  • 2013: Social security contributions linked to weeks effectively worked

1990s: Increase in the cost of dismissal
  • 2012: Introduction of temporary contracts;

  • 2012: Introduction of temporary contracts; reduction in hiring and firing costs

1988: Increase in the minimum overtime pre-mium, in value of paid vacations, in cost of dismissing workers and in payroll taxes
Special employment regimes
  • 2000, 2006: Agricultural promotion regime

  • 2003, 2008, 2013: Micro and small enterprises employment regime

Incentives to formalize employmentReduction in social security contributions for youth
  • 2010: Social security contributions for youth are discounted from income tax

  • 2016: Exemption of the contribution to the family compensation fund during the first year of employment for youth

2010: Subsidies for hiring youth who have never held a formal job2000: Subsidies for the hiring of young interns
Reduction in social security contributions for microentrepreneurs and/or SMEs 2014: Social Security Incorporation Regime (RISS)
  • 1999: New law for SMEs

  • 2008: Law on Individual Entrepreneurs (IME)

Simplification of business registration for entrepreneurs 2016: Exemption for the mercantile registry and the first renovation for young entrepreneur companies2016: Law on Entrepreneurship
Boost enterprise registration and creationSimplified taxation regimes for MSEs and microentrepreneurs
  • 2003, 2008, 2013: Promotion and formalization of Micro and Small Enterprises Act

  • 2003: New Simplified Single Regime (RUS)

  • 2004: Special Income Tax Regime (RER)

  • 2000: Micro, Small and Medium Enterprise Law

  • 2016: Simplified Tax Regime (Monotributo)

  • 2007: Tax Simplification Procedure (PST)

  • 2019: Simplified Tax Regime (RST)

2014: Fiscal Incorporation Regime (RIF)
  • 1984: Microenterprise Statute

  • 1988: New Federal Constitution, Art. 179

  • 1996, 2006: Simplified Taxation System (SIMPLES)

  • 2008: Law on Individual Entrepreneurs (IME)

Single windows for enterprises2007: Electronic payroll system2006: Planilla Integrada de Liquidacion de Aportes (PILA) 2014: eSocial
Simplification of business registration business
  • 2008: Only business license required to operate

  • 2012: Anti-Red Tape Decree legalization

2002: Rapid business start-up system (SARE)2006: National Network for the Simplification of Registration and Legalization of Companies and Business (REDESIM)

Evolution of WEF’s sampling guidelines and Survey sample size for the selected countries, 2008–2019

YearSample frame listsDefinition of firm sizeAverage number of respondentsNumber of respondents in the selected countries

PeruColombiaDominican RepublicMexicoBrazil

(2)(3)(4)(5)(6)(7)(8)(9)
2008SMEs; large enterprisesCountry-specific91841286173180
2009SMEs; large enterprisesCountry-specific958923561154181
2010SMEs; large enterprisesCountry-specific98861954394168
2011SMEs; large enterprisesCountry-specific988813754354185
2012SMEs; large enterprisesCountry-specific1008328691278143
2013SMEs; large enterprisesCountry-specific94.7852045632098
2014SMEs; large enterprisesCountry-specific92.88516262340114
2015SMEs; large enterprisesCountry-specific98.69116277311197
2016SMEs; large enterprisesCountry-specific102.88815878304128
2017Micro and large enterprises, SMEs<10, 11 −250, >25195.99013454291103
2018SMEs; large enterprises≤249; >25092.259811359208118
2019SMEs; large enterprises≤249; >25097.511211761161231
Language: English
Submitted on: Sep 20, 2022
Published on: Dec 31, 2023
Published by: Sciendo
In partnership with: Paradigm Publishing Services
Publication frequency: 1 times per year

© 2023 Celia P. Vera, Silvio Rendon, published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 License.