THE IMPACT OF COMPETITION ON ECONOMIC GROWTH

Аннотация

In this article, we discuss about the significant role of competition in economic development. It highlights the role of competition in supporting innovation, increasing economic efficiency, producing higher-quality products and services. Furthermore, it explores the challenges associated with negative consequences of excessive or unfair competition, such as predatory price wars, issues of resource inequity and potential harm to smaller businesses. On the other hand, the impact of competitive pressures from foreign markets, measured by trade freedom, is dependent on the country's technological gap. In particular, the results show that trade freedom has a stronger negative impact on growth as countries move closer to the technological frontier. Such an impact of trade freedom on growth applies to all countries, including MENA ones. Key words: competition, innovation, productivity, consumer, technological gap, monopoly, technological frontier, trade freedom, economic growth. Introduction: In today`s fast-paced world, the competitive environment has rapidly developed in almost all sectors, especially in the economy. In macroeconomics, competition refers to the process by which countries compete with each other for resources. In microeconomics, it refers to the process by which individual companies jockey with each other to appeal to consumers. Competition is a fundamental characteristic of market economies, playing a crucial role in determining the dynamic of supply and demand, pricing and innovation. In economics, competition refers to a process by which various sellers each try to offer better, higher quality products, lower prices and other advantages to choosing their wares over a rival`s. These forces companies to optimize their operations, ultimately benefiting consumers and fostering economic growth. However, alongside these benefits, there are also challenges, such as unfair competition, price wars, putting local businesses out of business. Competition in business is a fact of life for any industry and carries advantages and disadvantages for both sides of the transaction. While competition stimulates innovation and 22 Acumen: International Journal of Multidisciplinary Research Acumen: International Journal of Multidisciplinary Research ISSN: 3060-4745 IF(Impact Factor)10.41 / 2024 Volume 2, Issue 6 generates more choices, too much competition can hurt smaller businesses. Ultimately, large companies reduce consumer options. This article explores the impact of competition, highlighting both its advantages and disadvantages. Most traditional economists believe increased competition leads to greater benefits for all economic participants. One of the most significant advantages of technology in economy is efficiency and innovation. Competition encourages businesses to find ways to improve efficiency, lower costs, and develop new products and services. Economic analysis indicates more competitive markets lead to both increased innovation and greater overall economic growth as a result. If entrepreneurs feel the need to compete with other companies, they have an incentive to provide more unique and far less rare products for their customers. Competition also leads many brands to develop new products regularly to stay relevant to consumers. At the same time, the presence of competition also creates lower prices and wide choice for consumers. The large number of competitors in the market and their efforts to attract people to sell their products open up a wide range of opportunities for consumers. When a large number of companies compete with each other, one of the easiest ways for one to gain a competitive advantage over the others is to offer lower prices. As such, greater market competition leads to greater price competition, resulting in retailers passing on lower costs to their consumers. Product differentiation due to competition among sellers often gives consumers greater decision-making power. In a competitive economic environment, customers can choose between different products from a wide variety of brands rather than buying the same identical products one week to the next from a small number of companies or even a single firm. It has an affect on job creation. Fierce competition is expected to stimulate firms willingness to invest and their demand for labor. There are two key channels through which competition may lead to job creation. First, competition exerts downward pressure on prices and thus reduces the level of rents (or price markups) charged by firms. Second, producers can invest some of their productivity gains to expand their activities in other markets, thus raising their demand for labor and creating jobs. These two mechanisms both increase demand for jobs, bringing new, more, and better jobs into the economy. Just as there are two sides to a coin, while competition benefits consumers and promotes economic growth, it also has some negative consequences. One of the most pressing issues i