Measuring Competitiveness at the Subnational Level: The Case of 37 Nigerian States

Abstract

The purpose of this paper is to present a new approach to estimate competitiveness at the subnational level and identify the most important policy reforms likely to foster competitiveness in a locality. The model builds on the literature that links competitiveness to productivity and exploits a number of design features of composite indicators that allow for: (a) modeling the latent and multidimensional nature of competitiveness, (b) rewarding the most progress in policy areas where performance is worse, and (c) ensuring that the composite indicator is not driven by data availability. The methodology is applied to estimate the competitiveness ranking among 37 Nigerian states. The same structural model is then used to simulate the effects of policy reforms and to identify, for each state, the three reforms with the highest impact on the country’s competitiveness standing. The ultimate purpose of this method is to spark a healthy debate at the subnational and national levels regarding the most important reforms needed to improve competitiveness and contribute to the productivity growth of the private sector in economies around the world.