Biplot analysis of Mexico's State Competitiveness Index

Abstract

Competitiveness is fundamental to the economic and social development of a country, and is determined by factors such as innovation, efficiency, productivity and quality; in addition, some agents in the environment influence it. Measuring and analyzing competitiveness is a matter of great importance for government, entrepreneurs and academics, as its results allow better decision-making, as well as the design of public policies that encourage it. The Mexican Institute for Competitiveness is a non-profit civil association that since 2006 has been publishing the State Competitiveness Index, composed of ten subindexes, to measure competitiveness at the state level. This Institute has presented several analyses based on this index[1]. However, there are some multivariate statistics tools that can provide additional information to take advantage of other aspects of this information. The biplot is an exploratory graphical technique that allows to reduce the dimension of the space in which relationships between analysis units and variables that you want to study in them are examined. This reduction makes it easy to detect units that have similar characteristics related to the considered variables. It is also a tool for visualizing correlations or independence between variables studied in the analyzed data group. Finally, it can be used to establish the extent to which the variables explain the behavior of each individual in relation to the studied phenomenon. The objective of this work was to present a biplot analysis of the State Competitiveness Index prepared by the Mexican Institute for Competitiveness. This analysis allowed  to visualize the relationships between the subindexes used to calculate this index, and also allowed to observe graphically the extent to which the factors used in the construction of State Competitiveness Index explain the competitiveness of each federal entity. In this research the biplot method was used to analyze the State Competitiveness Index 2018 database. Among the most important results is the fact that competitiveness in Mexico is explained by two factors:  Inclusive and sustainable economic and social development and Reliable political and legal framework. It also turned out that there is correlation between some of the subindexes used by the Mexican Institute for Competitiveness, such as Factors market, Innovation in the economic sectors and Stable economy. On the other hand, some indicators such as Reliable and objective law system and Innovation in the economic sectors are independent of each other. Regarding the competitiveness of the states, it could be observed that the competitiveness of the first three places in the State Competitiveness Index 2018 can be attributed to strengths in very different areas for each of these three states, as shown by the results of the biplot analysis. It is concluded that this type of analysis facilitates the understanding of the factors that define the competitiveness of states, including the relationships between the indicators used to measure it and how they determine the competitiveness of each state. This kind of information can be used as an important auxiliary in the design of public politics appropriate to the particular situation of each federal entity in order to attract more investment and contribute to the improvement of the quality of life of its inhabitants.