Labour Market Rivalry In Spain

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Register to read the introduction… Thereby, a major disadvantage of doing business in Spain is its labour market rigidity. Overall, the labour market efficiency (rank 108) is among the worst in the world. Due to the strict hiring and firing regulations (rank 129), Spanish businesses do not have the flexibility to react properly to business cycle changes. A further institutional constraint is the nearly endless number of procedures to start a business (rank 110). In addition, the large extent and effect of taxation (rank 111) decreases the incentive be productive and earing an above-average salary. (WEF 2012)
According to Porter (1990) a strong local rivalry is the most important factors in the Diamond, because it stimulates all other factors. A company that is successful in a highly competitive domestic market has developed an unique set of skills which are helpful to compete internationally (Fisher et al., 2006). Spain has a relative intense local competition (rank 23). Moreover, its trade tariffs (rank 6) are among the lowest in the world which facilitates the market entry of foreign companies and thereby increase the domestic
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Appendix

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Source: International Monetary Fund 2008

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Source: International Monetary Fund 2008

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Source: WEF Global Competitive Report 2012

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[1] Compare Adam Smith’s (1776) absolute advantage theory and David Ricardo’s (1963) comparative advantage theory
[2] Compare Paul Krugman’s (1981) global strategic rivalry theory
[3] WEF = World Economic Forum
[4] OECD = Organisation for Economic Co-operation and Development
[5] If the author mentions Spain’s position in a ranking, he always refers to WEF[6] Global Competitive Report (2012) that ranks 144 countries all over the

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