Industrial Sector Competitiveness in OECD Countries and Its Impact on Growth

Abstract

The potential of the industrial sector to create added value and contribute to foreign trade also contributes to the development of the country's technological and innovative capacity. The development of new products and production techniques through R&D and innovation brings productivity increases and thus further accelerates economic growth. In addition, the industrial sector supports the development of other areas of the economy by increasing investments in the country's infrastructure and other sectors. This study investigates which industrial sectors most effectively spur economic growth, positing that industrial productivity and sustainable growth will rise with investments in this environment. The influence of industrial competitiveness on economic growth in 38 OECD countries was analyzed using the Panel ARDL model and data from 1999-2021. Competitiveness data from the World Trade Organization includes the Vollrath Relative Trade Advantage (RTA) index, which is created with sectoral import and export data. The long-term results indicate that competitiveness positively impacts economic growth across all sectors, except iron and steel, with textiles playing a pivotal role. Short-term results show that iron and steel competitiveness negatively affect growth. The findings underscore the importance of supporting highly competitive sectors to foster economic growth.