Public Finance Quarterly Archive Articles

Competitiveness Based on Knowledge and Innovation

11:22, március 11, 2018.

Possibilities of Increasing Budget Revenues in the Era of Digitalisation and Robotisation

Magdolna Csath
Doctor of the Hungarian Academy of Sciences (DSc), Professor Emerita
research professor, private teacher,
Szent István University, National University of Public Service

Published in: Public Finance Quarterly 2018/1. (p. 64-79.)

Summary: The article examines the changes in the contents of the term competitiveness, in particular the new requirements evolving due to the rapid technological changes caused by the Fourth Industrial Revolution. Various levels of competitiveness are distinguished, and it is explained how good governance can strengthen the different levels. The article presents the new sources for competitiveness, including resources for the improvement of innovative and human skills. The state of the Hungarian economy in relation to such new resources is also analysed. The effect of global value chains on economic diversification, potential for innovation and the usability of human capital is analysed in detail. The article draws attention to the fact that short value chains increase the vulnerability of the economy and may limit the expansion of budget revenues. Our study also analyses our country’s know-how with regard to stepping on the path towards knowledge- and innovation-based competitiveness. It states that Hungary suffers from innovation and knowledge deficit, which inhibits the improvement of competitiveness. As a conclusion, the study emphasises that in order to improve competitiveness, it is important to lengthen value chains, thus increasing the proportion of innovative activities and the number of innovative workplaces. At the same time, economic diversification can also be improved, the new value produced in Hungary will increase and even our exchange ratio in international markets can get better if we compete with our knowledge. To achieve the aforementioned goal, we should increase investment into human capital, as well as improve the effectiveness and efficiency of the use of resources. As the direct and indirect effects of the suggested changes, not only competitiveness, but also the revenues ensuring the expansion of the budget in the future could increase.

Keywords: value chains, knowledge- and innovation-based competition, innovative skills, human capital, digitalisation

JEL codes: O31, O38

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