Template-type: ReDIF-Article 1.0 Author-Name: François Marical Author-Name: Marco Mira d'Ercole Author-Workplace-Name: OECD Author-Name: Maria Vaalavuo Author-Name: Gerlinde Verbist Title: Publicly provided services and the distribution of households' economic resources Abstract: Conventional income distribution statistics subtract taxes from household income but do not take into account the distributional effects of the services financed through these taxes. As many of the functions of government are available to the population free of charge or at a subsidised rate, this means that income distribution figures exaggerate the degree of inequality in the distribution of resources. This article examines the extent to which this is the case, and assesses whether statements about the relative inequality prevailing in different countries are reliable. Estimates of the impact of government services on the static distribution of household income, based on two different approaches, show that publicly-provided goods and services significantly narrow the dispersion of income inequality across countries with only small changes in the ranking of individual countries, and that the effects are larger when looking at the extremes of the distributions. Journal: OECD Journal: Economic Studies Year: 2008 Pages: 1-38 Volume: 2008 Issue: 1 Handle: RePEc:oec:ecokac:5KZN3N2FSFQ2 Template-type: ReDIF-Article 1.0 Author-Name: Espen Erlandsen Title: Improving the efficiency of health care spending: What can be learnt from partial and selected analyses of hospital performance? Abstract: There are no ready-made data on hospital outputs and inputs which would allow comprehensive international comparisons of hospital efficiency to be carried out. This paper, therefore, relies on selected evidence to compare hospital efficiency in a sub-set of OECD countries, based on three different approaches relying on, respectively: i) unit costs for standard hospital treatments; ii) overall efficiency levels in a set of paired countries; iii) within-country dispersion in individual hospital efficiency. The analysis suggests substantial cross-country differences in hospital performance. Although country coverage varies between the different approaches, making it difficult to assess the extent to which comparisons provide a consistent picture of national efficiency levels, cross-checks between the different indicator sets tend to support the robustness of the country rankings. Journal: OECD Journal: Economic Studies Year: 2008 Pages: 1-33 Volume: 2008 Issue: 1 Handle: RePEc:oec:ecokac:5KZN3N28F4MS Template-type: ReDIF-Article 1.0 Author-Name: Margit Molnar Author-Workplace-Name: OECD Author-Name: Nigel Pain Author-Name: Daria Taglioni Title: Globalisation and employment in the OECD Abstract: This article reviews some of the possible changes that may occur in the national labour markets of many OECD countries as a result of the internationalisation of production by multinational companies, with a particular focus on the impact of outward foreign direct investment (FDI) from OECD countries on employment in the home country of the investing firms. Existing studies suggest that the overall impact of trade and the internationalisation of production on aggregate labour market outcomes has been comparatively small, although particular skill and occupational groups have been affected more strongly. The empirical findings in the paper suggest that the aggregate employment impact of outward FDI varies across industries and countries. For manufacturing industries with strong commercial links with the non-OECD economies, there is evidence that domestic employment has become more sensitive to movements in domestic labour costs. At the country level, the growth of outward investment is found to have a significant positive effect on domestic employment growth in the United States. In contrast, there is a negative association in Japan, especially from outward investment in China. Journal: OECD Journal: Economic Studies Year: 2008 Pages: 1-34 Volume: 2008 Issue: 1 Handle: RePEc:oec:ecokac:5KZN3N25440W Template-type: ReDIF-Article 1.0 Author-Name: Nigel Pain Author-Name: Isabell Koske Author-Name: Marte Sollie Title: Globalisation and OECD consumer price inflation Abstract: Over the past 25 years inflation has moderated considerably in all OECD economies. At the same time, the production of many goods and services has become increasingly internationalised and the level of trade between the OECD and non-OECD economies has risen markedly. This paper investigates the extent to which the observed changes in the inflation process can be attributed to the increasing integration of non-OECD economies into the global economy. The results of the analysis show that i) import prices have become a more important driver of domestic consumer prices since the mid-1990s; ii) the sensitivity of inflation to domestic economic conditions has declined whereas the sensitivity to foreign economic conditions has risen, working through import prices; and iii) the strong GDP growth in the non-OECD economies over the past five years has contributed to the growth of real oil and metals prices. A scenario analysis shows that globalisation has put upward pressure on inflation via higher commodity prices and downward pressure via lower non-commodity import prices with the latter effect having dominated in most OECD economies. Journal: OECD Journal: Economic Studies Year: 2008 Pages: 1-32 Volume: 2008 Issue: 1 Handle: RePEc:oec:ecokac:5KZMW7MQDL0V Template-type: ReDIF-Article 1.0 Author-Name: Karine Hervé Author-Name: Isabell Koske Author-Name: Nigel Pain Author-Name: Franck Sédillot Title: The macroeconomic policy challenges of continued globalisation Abstract: This article investigates the macroeconomic policy challenges associated with a prospective continuation of international trade and financial integration over the next two decades, making use of a global macroeconomic model newly developed by the OECD. The analysis has several important policy implications. First, with the shares of non-OECD economies in world output, trade, and capital markets rising substantially, global economic developments would become much more dependent on developments in these economies than they used to be. Second, the sustainability of existing global current account imbalances will depend in part on the future build-up and composition of international assets and liabilities. While the imbalances could be sustainable for some time if economic integration continues at its current pace, a slowdown of the globalisation process would raise the likelihood of a disruptive adjustment in financial markets. Third, the increase in trade and financial linkages implies that macroeconomic shocks in a given country or region have a larger impact on other economies in the future than they do today. Policymakers in the OECD may have to act more promptly and more vigorously to economic “shocks” in the non-OECD economies in order to limit the impact on OECD economies. Journal: OECD Journal: Economic Studies Year: 2008 Pages: 1-51 Volume: 2008 Issue: 1 Handle: RePEc:oec:ecokac:5KZMW7MJ7MF7 Template-type: ReDIF-Article 1.0 Author-Name: Romain Duval Author-Name: Lukas Vogel Title: Economic resilience to shocks: The role of structural policies Abstract: Cyclical fluctuations in economic activity have moderated over time but the extent and dynamics of volatility remain different across OECD countries. A reason behind this heterogeneity is that countries exhibit different degrees of resilience in the face of common shocks. This paper traces divergences in resilience back to different policy settings and institutions in labour, product and financial markets. Using pooled regression analysis across 20 OECD countries over the period 1982-2003, the paper identifies the impact of policy settings on two dimensions of resilience: the impact effect of a shock and its subsequent persistence. Policies and institutions associated with rigidities in labour and product markets are found to dampen the initial impact of shocks but to make their effects more persistent, while policies allowing for deep mortgage markets lower persistence and thereby improve resilience. Combining these two dimensions of resilience, the paper then uses the estimated equations to derive indicators of resilience for the OECD countries concerned, based on their current or recent policy settings. Three groups of countries emerge. In English-speaking countries, simulations suggest shocks have a significant initial effect on activity but this impact then dies out relatively quickly. By contrast, in many continental European countries the initial impact of shocks is cushioned but their effect linger for longer, with the cumulated output loss tending to be larger than in English-speaking countries. Finally a few, mostly small, European countries combine cushioning of the initial shock with a fairly quick return to baseline. Journal: OECD Journal: Economic Studies Year: 2008 Pages: 1-38 Volume: 2008 Issue: 1 Handle: RePEc:oec:ecokac:5KZHDCDDNNVK Template-type: ReDIF-Article 1.0 Author-Name: Philip Bagnoli Author-Name: Jean Chateau Author-Name: Yong Gun Kim Title: The incidence of carbon pricing: Norway, Russia and the Middle East Abstract: Russia, Norway and the Middle East are three regions that have distinct histories in energy policies. Current situations will make it more challenging for Russia and the Middle East to implement greenhouse gas abatement than it will be for Norway, even though all three are major energy producers. Relative to the world as a whole, Russia is most heavily impacted, with the Middle East less so but still significantly affected. Norway’s potential economic loss is only a little larger than the world average. This asymmetry implies that if the differences in impacts are not broadly understood, then international negotiations may be subjected to bargaining under asymmetric information. If so, they may not be able to reach agreement. The result reported here is thus a step in overcoming information asymmetries and facilitating successful negotiation. The results also have clear implications for the speed at which Russia undertakes energy market reforms, and for the manner in which Middle Eastern countries implement diversification of their economies. Journal: OECD Journal: Economic Studies Year: 2008 Pages: 1-26 Volume: 2008 Issue: 1 Handle: RePEc:oec:ecokac:5KZG23KZ0VKB Template-type: ReDIF-Article 1.0 Author-Name: Hansjörg Blöchliger Author-Name: Claire Charbit Title: Fiscal equalisation Abstract: By Hansjörg Blöchliger and Claire Charbit Fiscal equalisation is a transfer of fiscal resources across jurisdictions to offset disparities in revenue raising capacity or public service cost. It covers on average 2.5% of GDP or 5% of total government expenditure across OECD countries. Equalisation reduces fiscal disparities by two-thirds on average and in some countries levels them virtually out. Strong equalisation comes at a price: on average, around 70% of a jurisdiction’s additional tax income must be dedicated to an equalisation fund. The equalisation rate is generally higher for jurisdictions with low fiscal capacity, reducing their tax effort and likely to slow down regional economic convergence. Cost equalisation is larger than revenue equalisation in terms of GDP despite smaller cost disparities, pointing at inefficiencies in the distribution formulae. Fiscal equalisation can be pro-cyclical but most countries succeed in reducing fluctuations of entitlements, sometimes at the cost of sub-central budget needs. Fiscal equalisation is very country specific, and data and analysis must be taken with care. Journal: OECD Journal: Economic Studies Year: 2008 Pages: 1-22 Volume: 2008 Issue: 1 Handle: RePEc:oec:ecokac:5KZBQWFVWTQ7 Template-type: ReDIF-Article 1.0 Author-Name: Hervé Boulhol Author-Name: Alain de Serres Author-Name: Margit Molnar Author-Workplace-Name: OECD Title: The contribution of economic geography to GDP per capita Abstract: This article examines how much of the dispersion in economic performance across OECD countries can be accounted for by the proximity to areas of dense economic activity. To do so, various indicators of distance to markets and transportation costs are added as determinants in an augmented Solow model, which serves as a benchmark. Measures of distance to markets are found to have a statistically significant effect on GDP per capita. And the estimated economic impact is far from negligible. The reduced access to markets relative to the OECD average could contribute negatively to GDP per capita by as much as 11% in Australia and New Zealand. Conversely, a favourable impact of around 6-7% of GDP is found in the case of two centrally-located countries: Belgium and the Netherlands. The paper provides also some tentative evidence that spending on R&D and human capital might have a stronger effect on GDP per capita in countries with a higher degree of urban concentration. Journal: OECD Journal: Economic Studies Year: 2008 Pages: 1-37 Volume: 2008 Issue: 1 Handle: RePEc:oec:ecokac:5KZ9L4RZ66LS Template-type: ReDIF-Article 1.0 Author-Name: Orsetta Causa Title: The policy determinants of hours worked across OECD countries Abstract: This article investigates the policy determinants of hours worked among employed individuals in OECD countries, focussing on the impact of taxation, working-time regulations, and other labour and product market policies. It explores the factors underlying cross-country differences in hours worked — in line with previous aggregate approaches — while at the same time it looks more closely at labour force heterogeneity — in the vein of microeconomic labour supply models. The paper shows that policies and institutions have a different impact on working hours of men and women. Firstly, while high marginal taxes create a disincentive to work longer hours for women, their impact on hours worked by men is almost insignificant. Secondly, working-time regulations have a significant impact on hours worked by men, and this impact differs across education categories. Thirdly, other labour and product market policies, in particular stringent employment protection of workers on regular contracts and competition-restraining product market policies, have a negative impact on hours worked by men, over and beyond their impact on employment levels. Journal: OECD Journal: Economic Studies Year: 2009 Pages: 1-39 Volume: 2009 Issue: 1 Handle: RePEc:oec:ecokac:5KSNX2PNF7HF Template-type: ReDIF-Article 1.0 Author-Name: Romina Boarini Author-Name: Elke Lüdemann Title: The role of teacher compensation and selected accountability policies for learning outcomes: An empirical analysis for OECD countries Abstract: Educational outcomes are shaped by a wide range of factors, including innate students’ characteristics, family and school background and other environmental factors. But a key-question for policy-makers is what schools and school policies can do to raise overall student performance. Several studies have indeed shown the positive effect of an increase in cognitive skills and competencies on both social and individual economic welfare. From a macroeconomic viewpoint, international differences in student achievement tests have been shown to increase long-run economic growth. Our analysis focuses on the quality of school systems, i.e. on the association of educational policies with average learning outcomes. Journal: OECD Journal: Economic Studies Year: 2009 Pages: 1-20 Volume: 2009 Issue: 1 Handle: RePEc:oec:ecokac:5KS5M1F8QRQ7 Template-type: ReDIF-Article 1.0 Author-Name: Ivan Haščič Author-Workplace-Name: OECD Author-Name: Frans de Vries Author-Name: Nick Johnstone Author-Name: Neelakshi Medhi Title: Effects of environmental policy on the type of innovation: The case of automotive emission-control technologies Abstract: This article uses patent data to assess policy factors (domestic and international) for patenting activity in automotive emission control technologies. Particular attention is paid to the role of different policy types and fuel prices on both post-combustion and integrated abatement technologies. The results confirm that fuel prices have played a role in the development of integrated strategies, while regulatory standards have been more important with respect to post-combustion technologies.  In addition, ‘integrated’ abatement strategies are more closely linked to general determinants of innovation than is the case for post-combustion technologies. This has implications for the design of policies which encourage innovations with both private and public benefits.  Journal: OECD Journal: Economic Studies Year: 2009 Pages: 1-18 Volume: 2009 Issue: 1 Handle: RePEc:oec:ecokac:5KSNSWKWZZF4 Template-type: ReDIF-Article 1.0 Author-Name: Sean Dougherty Author-Name: Richard Herd Author-Name: Thomas Chalaux Title: What is holding back productivity growth in India ?: Recent microevidence Abstract: This article examines recent micro-evidence on the productivity of Indian firms, helping to explain why India’s manufacturing sector has not performed as well as many observers expected. A series of structural distortions are documented, all of which may depress the performance of manufacturing, and thus the economy as a whole. These distortions exist at multiple levels, and reflect long-standing problems with the reallocation of labour across sectors, the excessively small scale of firms, low firm turnover, poor product market integration, high industry concentration and persistent state ownership. Combined, these phenomena represent severe restraints on the level and growth of productivity in manufacturing, and suggest that much remains to be done to improve the strength and sustainability of India’s development path. Journal: OECD Journal: Economic Studies Year: 2009 Pages: 1-22 Volume: 2009 Issue: 1 Handle: RePEc:oec:ecokac:5KSNSWKCQ236 Template-type: ReDIF-Article 1.0 Author-Name: Douglas Sutherland Author-Email: douglas.sutherland@oecd.org Author-Name: Robert Price Author-Email: robert.price@oecd.org Author-Name: Eric Gonand Title: Improving public spending efficiency in primary and secondary education Abstract: Influenced by the perceived link between higher levels of educational attainment and growth, the education sector has seen significant reform efforts in recent years in a number of countries. Public spending in this sector has increased on average by one-fifth in real terms over the past decade and growth in terms of spending per student has also been marked in many countries (Figure 1, upper panel); governments in the OECD area now spend on average around 3% of GDP on primary and secondary education. However, a close correspondence between the level of resources and educational outcomes is difficult to demonstrate empirically: cross-sectional evidence reveals only a weak correlation between national spending per student or teaching resources and mean pupil performance in standardised tests (Figure 1, lower panels). Extra resources devoted to education do not automatically lead to commensurate improvements in outcomes. Journal: OECD Journal: Economic Studies Year: 2009 Pages: 1-30 Volume: 2009 Issue: 1 Handle: RePEc:oec:ecokac:5KSNSWJGJDMW Template-type: ReDIF-Article 1.0 Author-Name: Joaquim Oliveira Martins Author-Name: Romina Boarini Author-Name: Hubert Strauss Author-Name: Christine de la Maisonneuve Title: The policy determinants of investment in tertiary education Abstract: The purpose of this article is to discuss how policies can affect investment in tertiary education in ways that would eliminate some of the perceived shortcomings of existing systems, while preserving or (preferably) enhancing equality of access to higher education. To this end, the analysis focuses on the institutional set-up of tertiary education that provides incentives for supplying quality educational services; the private returns from higher education which act to attract prospective students; and, individual funding mechanisms to help overcome the liquidity constraints that may restrict participation in higher education. These mechanisms should also be designed so as to prevent uncertainty about future incomes from unduly deterring investment in tertiary studies by risk-averse individuals. Joaquim Oliveira Martins, Romina Boarini, Hubert Strauss and Christine de la Maisonneuve Journal: OECD Journal: Economic Studies Year: 2009 Pages: 1-37 Volume: 2009 Issue: 1 Handle: RePEc:oec:ecokac:5KSGQW6Q3NVG Template-type: ReDIF-Article 1.0 Author-Name: Paul Conway Author-Name: Richard Herd Title: How competitive is product market regulation in India?: An international and cross-state comparison Abstract: This paper assesses the extent to which India's regulatory environment promotes or inhibits competition in markets where technology and market conditions make competition viable. The analysis is based on the OECD’s indicators of Product Market Regulation (PMR) which have been used extensively over the last decade to benchmark regulatory frameworks in OECD countries and have proven useful in encouraging countries to implement structural reforms that enhance economic performance. Journal: OECD Journal: Economic Studies Year: 2009 Pages: 1-25 Volume: 2009 Issue: 1 Handle: RePEc:oec:ecokac:5KS8KQTJ8GLX Template-type: ReDIF-Article 1.0 Author-Name: Hubert Strauss Author-Name: Christine de la Maisonneuve Title: The wage premium on tertiary education: New estimates for 21 OECD countries Abstract: This study focuses on the single most important component of the private return on tertiary education, the gross wage premium. There are at least two additional reasons for paying particular attention to wage premia. First, the wage premium earned by existing graduates is easy to observe, so high-school leavers can be assumed to take it into account when deciding for or against enrolment in tertiary education. Second, to the extent that wages reflect marginal labour productivity, estimates of wage premia are sometimes used to assess the quality of human capital in an economy with a view to correcting simpler measures based on years of schooling or attainment levels. Journal: OECD Journal: Economic Studies Year: 2009 Pages: 1-29 Volume: 2009 Issue: 1 Handle: RePEc:oec:ecokac:5KS8GZTP5C5H Template-type: ReDIF-Article 1.0 Author-Name: E. Philip Davis Title: New International Evidence on Asset-Price Effects on Investment, and a Survey for Consumption Abstract: A survey of the literature on asset price impacts on the real economy shows a much wider range of work on consumption and related wealth effects than on investment. The existence of wealth effects on consumption per se is little contested, but there remains an issue of whether different effects should hold between countries and across assets. On balance we contend that the literature suggests a role for housing and tangible wealth as well as financial wealth as a determination of consumption. In terms of investment there are numerous studies implying that uncertainty and balance sheet effects on investment can both be detected, albeit the latter more in micro than macro studies. In the light of the investment literature, we undertook panel investment functions on a macro basis for up to 23 OECD countries. Developing earlier work, it was found that the main significant effects arising from asset prices come from the financial accelerator, credit channel and Tobin’s Q (especially in the G7) and uncertainty as proxied by asset price volatility (especially in smaller OECD countries). There is also evidence for non-linearities in volatility. Descriptive analysis as well as tentative cross-sectional regression showed that both balance sheet and uncertainty channels played a role in the recent financial crisis, when investment fell sharply, although the simple accelerator was also important. The work has implications for monetary, fiscal and regulatory policies, all of which can impact on asset prices and the financial sector and thus via this channel on the wider economy. Journal: OECD Journal: Economic Studies Year: 2010 Pages: 1-50 Volume: 2010 Issue: 1 Handle: RePEc:oec:ecokac:5KM33SCV75KC Template-type: ReDIF-Article 1.0 Author-Name: Vincenzo Spiezia Title: Does Computer Use Increase Educational Achievements? Student-level Evidence from PISA Abstract: The aim of this paper is to assess whether the use of ICT has an impact on student performances as measured in the OECD Programme for International Student Assessment (PISA) 2006. After controlling for observable students’ characteristics and self-selection, we did find a positive and significant effect of the frequency of computer use on science scores. In most countries, however, this effect seems larger when computer is used at home rather than at school. This finding questions the effectiveness of educational policies aimed at promoting computer use at school as a tool for learning. Journal: OECD Journal: Economic Studies Year: 2010 Pages: 1-22 Volume: 2010 Issue: 1 Handle: RePEc:oec:ecokac:5KM33SCWLVKF Template-type: ReDIF-Article 1.0 Author-Name: Orsetta Causa Author-Name: Åsa Johansson Title: Intergenerational Social Mobility in OECD Countries Abstract: This paper assesses recent patterns of intergenerational social mobility across OECD countries and examines the role that public policies can play. It shows that the relationship between parental or socio-economic background and offspring educational and wage outcomes is positive and significant in practically all countries for which evidence is available. Intergenerational social mobility is measured by several different indicators, since no single indicator provides a complete picture. However, one pattern that emerges is of a group of countries, southern European countries and Luxembourg, which appears to rank as relatively immobile on most indicators, while another group, the Nordic countries, is found to be more mobile. Furthermore, public policies such as education and early childcare play a role in explaining observed differences in intergenerational social mobility across countries. Journal: OECD Journal: Economic Studies Year: 2010 Pages: 1-44 Volume: 2010 Issue: 1 Handle: RePEc:oec:ecokac:5KM33SCZ5RJJ Template-type: ReDIF-Article 1.0 Author-Name: Orsetta Causa Author-Name: Catherine Chapuis Title: Equity in Student Achievement Across OECD Countries: An Investigation of the Role of Policies Abstract: This paper focuses on inequalities in learning opportunities for individuals coming from different socio-economic backgrounds as a measure of (in)equality of opportunity in OECD countries and provides insights on the potential role played by policies and institutions in shaping countries’ relative positions. Based on harmonised 15-year old students’ achievement data collected at the individual level, the empirical analysis shows that while Nordic European countries exhibit relatively low levels of inequality, continental Europe is characterised by high levels of inequality – in particular of schooling segregation along socio-economic lines – while Anglo-Saxon countries occupy a somewhat intermediate position. Despite the difficulty of properly identifying causal relationship, cross-country regression analysis provides insights on the potential for policies to explain observed differences in equity in education. Journal: OECD Journal: Economic Studies Year: 2010 Pages: 1-50 Volume: 2010 Issue: 1 Handle: RePEc:oec:ecokac:5KM61LB7B39X Template-type: ReDIF-Article 1.0 Author-Name: Romina Boarini Author-Name: Hubert Strauss Title: What is the private return to tertiary education?: New evidence from 21 OECD countries Abstract: This article provides estimates of the private Internal Rates of Return to tertiary education for women and men in 21 OECD countries, for the years between 1991 and 2005. IRR are computed by estimating labour market premia on cross-country comparable individual-level data. Labour market premia are then adjusted for fiscal factors and costs of education. We find that returns to an additional year of tertiary education are on average above 8% and vary in a range from 4 to 15% in the countries and in the period under study. IRR are relatively homogenous across genders. Overall, a slightly increasing trend is observed over time. The article discusses various policy levers for shaping individual incentives to invest in tertiary education and provides some illustrative quantification of the impact of policy changes on those incentives. Journal: OECD Journal: Economic Studies Year: 2010 Pages: 1-25 Volume: 2010 Issue: 1 Handle: RePEc:oec:ecokac:5KMH5X51FV5F Template-type: ReDIF-Article 1.0 Author-Name: Novella Bottini Author-Name: Margit Molnar Author-Workplace-Name: OECD Title: How large are competitive pressures in services markets?: Estimation of mark-ups for selected OECD countries Abstract: Mark-ups can provide valuable information on competitive pressures in various sectors of the economy, reflecting pressures stemming from rules of conduct imposed by regulators as well as those arising from such factors as trade and FDI or increasing consumer demands in terms of price and quality. This study estimates mark-ups for services industries in European OECD members and its novelty is that it i) allows for non-constant returns to scale, ii) jointly estimates mark-ups for all sectors and in all countries and iii) estimates mark-ups at a detailed level of sectoral disaggregation. The estimation is done for the period 1993-2006 and uses firm level data of the Amadeus database. In general, the estimated mark-ups are higher for professional services, real estate, renting and utilities, while they tend to be substantially lower for construction, computer services, retail and wholesale trade and catering. There is also large variation across countries in terms of the sizes of the estimated mark-ups. Competitive pressures according to these mark-ups should be large in the United Kingdom and most Scandinavian countries, and relatively small in Central European countries, Sweden and Italy. Journal: OECD Journal: Economic Studies Year: 2010 Pages: 1-51 Volume: 2010 Issue: 1 Handle: RePEc:oec:ecokac:5KMH5X5DBKF8 Template-type: ReDIF-Article 1.0 Author-Name: Davide Furceri Author-Name: Annabelle Mourougane Title: Structural indicators: A critical review Abstract: This article reviews and assesses in terms of availability, reliability and transparency, existing policy and outcome indicators that have been found to be linked both directly and indirectly to economic growth and living standards. Indicators aiming at capturing the political and social situation of countries, as well as governance-related issues, are examined (e.g., political system, political stability, corruption, crime and violence). Topics also include product and labour markets, infrastructure, trade, financial indicators and composite indices of reform. Journal: OECD Journal: Economic Studies Year: 2010 Pages: 1-34 Volume: 2010 Issue: 1 Handle: RePEc:oec:ecokac:5KMH5XPHHNJJ Template-type: ReDIF-Article 1.0 Author-Name: Sébastien Jean Author-Name: Orsetta Causa Author-Name: Miguel Jimenez Author-Name: Isabelle Wanner Title: Migration and labour market outcomes in OECD countries Abstract: Immigration pressures are increasing in most OECD countries. This article investigates the consequences of immigration for natives’ labour market outcomes, as well as issues linked to immigrants’ integration in the host country labour market. Changes in the share of immigrants in the labour force may have a distributive impact on natives’ wages, and a temporary impact on unemployment. However, labour market integration of immigrants (as well as integration of second-generation immigrants both in terms of educational attainments and of labour market outcomes) remains the main challenge facing host economies. In both cases, product and labour market policies have a significant role to play in easing the economy’s adjustment to immigration. Journal: OECD Journal: Economic Studies Year: 2010 Pages: 1-34 Volume: 2010 Issue: 1 Handle: RePEc:oec:ecokac:5KMHF827KWS6 Template-type: ReDIF-Article 1.0 Author-Name: Dan Andrews Author-Name: Aida Caldera Sánchez Title: The Evolution of Homeownership Rates in Selected OECD Countries: Demographic and Public Policy Influences Abstract: Homeownership rates have increased significantly in many OECD countries over recent decades. Using micro-econometric decomposition techniques, this paper shows that part of this increase can be explained by changes in the characteristics of households, including age, household structure, income and education. Nevertheless, a significant portion of the change in homeownership rates remains unexplained by shifts in household characteristics, leaving a potential role for public policy in explaining developments in homeownership rates. Panel estimates suggest that the relaxation of down-payment constraints on mortgage loans has increased homeownership rates among credit-constrained households over recent decades, resulting in a rise in the aggregate homeownership rate that is comparable with the impact of population ageing. In countries where tax relief on mortgage debt financing is generous, however, the expansionary impact of mortgage market innovations on homeownership is smaller. This is consistent with the tendency for such housing tax relief to be capitalised into real house prices, which may crowd-out some financially constrained households from homeownership at the margin. The impact of housing policies regulating the functioning of the rental market, such as rent regulation and provisions for tenure security, on tenure choice is also explored. JEL classification: R21, R31, G21, H24. Keywords: Housing markets, homeownership, mortgage markets, financial regulation, taxation. Journal: OECD Journal: Economic Studies Year: 2011 Pages: 1-37 Volume: 2011 Issue: 1 Handle: RePEc:oec:ecokac:5KG0VSWQPMG2 Template-type: ReDIF-Article 1.0 Author-Name: Aida Caldera Sánchez Author-Name: Dan Andrews Title: Residential Mobility and Public Policy in OECD Countries Abstract: Residential mobility is closely tied to the functioning of housing markets and has important implications for labour mobility and the efficient allocation of resources across the economy. This paper analyses patterns of residential mobility across OECD countries and the role of housing policies in enhancing or hampering residential mobility. Based on cross-sectional household data for 25countries, the results suggest that differences in residential mobility across countries are partially related to differences in public policies. After controlling for household and country- specific characteristics, residential mobility is higher in countries with lower transaction costs, more responsive housing supply, lower rent controls and tenant protection. Residential mobility tends also to be higher in environments with greater access to credit, suggesting that financial deregulation – by lowering borrowing costs and facilitating access to mortgage finance – facilitates mobility. This cross- country evidence is supported by city and state-level evidence for the United States. JEL classification: R23, R31, R21, R38, H20. Keywords: Housing markets, residential mobility, transaction costs, rental market regulations Journal: OECD Journal: Economic Studies Year: 2011 Pages: 1-22 Volume: 2011 Issue: 1 Handle: RePEc:oec:ecokac:5KG0VSWQT240 Template-type: ReDIF-Article 1.0 Author-Name: Vincenzo Spiezia Title: Are ICT Users More Innovative?: an Analysis of ICT-Enabled Innovation in OECD Firms Abstract: The aim of this study is to assess the effects of information and communications technologies (ICTs) on firms’ capabilities to innovate in a selection of OECD countries. Our findings support the hypothesis that ICTs act as an enabler of innovation, particularly for product and marketing innovation, in both manufacturing and services. However, we did not find any evidence that ICT use increases the capability of a firm to co-operate, to develop innovation in-house or to introduce products new to the market. These results suggest that ICTs enable firms to adopt innovation but they do not increase their “inventive” capabilities. Keywords: ICT, Innovation, micro data, Conditional Maximum Likelihood Journal: OECD Journal: Economic Studies Year: 2011 Pages: 1-21 Volume: 2011 Issue: 1 Handle: RePEc:oec:ecokac:5KG2D2HKN6VG Template-type: ReDIF-Article 1.0 Author-Name: Robert Hagemann Title: How Can Fiscal Councils Strengthen Fiscal Performance? Abstract: There is growing interest in the role of independent fiscal institutions, or fiscal councils, in helping to improve fiscal performance. This article provides some guidance on the scope for improving fiscal performance through fiscal councils based on the available literature and the range of fiscal institutions in the OECD countries. The effectiveness of fiscal councils hinges on several factors, including having full autonomy within the scope of their mandates, active and unfettered dissemination of their analysis, and their credibility. Experience and empirical evidence suggest that delegating macroeconomic forecasting to an independent fiscal council can indeed reduce forecasting bias. There is some empirical evidence that independent fiscal institutions can buttress a government’s capacity to comply with a numerical rule. Good fiscal institutions are a necessary condition for achieving disciplined fiscal performance. Experience demonstrates, however, that their existence is not sufficient. Without strong and sustained political commitment to a medium-term fiscal goal and, where relevant, to the mandate of a fiscal council, durable improvements in fiscal performance will remain elusive. Keywords: Fiscal policy, fiscal councils, fiscal frameworks Journal: OECD Journal: Economic Studies Year: 2011 Pages: 1-24 Volume: 2011 Issue: 1 Handle: RePEc:oec:ecokac:5KG2D3GX4D5C Template-type: ReDIF-Article 1.0 Author-Name: Douglas Sutherland Author-Email: douglas.sutherland@oecd.org Author-Workplace-Name: OECD Author-Name: Sónia Araújo Author-Name: Balázs Égert Author-Name: Tomasz Kozluk Title: Public Policies and Investment in Network Infrastructure Abstract: How can public policy influence investment in infrastructure in network industries? Network industries rely mainly on fixed networks to deliver services, with investment being lumpy and largely irreversible. As a result, public policies – such as public provision, the introduction of competition and the regulatory environment – can potentially have an important impact on investment behaviour, with the net effect depending on the extent that policies boost socially-productive investment or reduce inefficient investment. Drawing on responses to a unique questionnaire assessing public policy in the network sectors, the information in this paper presents a systematic picture of relevant policies in place across OECD countries. Econometric analysis – both at the sectoral and firm level – finds that public policies can have significant quantitative effects. In particular, the introduction of competitive pressures through the reduction of barriers to entry and the combination of regulator independence and incentive regulation can promote investment in the sector. Keywords: Infrastructure, growth, network industries, investment, regulation Journal: OECD Journal: Economic Studies Year: 2011 Pages: 1-23 Volume: 2011 Issue: 1 Handle: RePEc:oec:ecokac:5KG51MLVK6R6 Template-type: ReDIF-Article 1.0 Author-Name: Clovis Kerdrain Author-Name: Isabell Koske Author-Name: Isabelle Wanner Title: Current Account Imbalances: can Structural Reforms Help to Reduce Them? Abstract: This article explores the impact of structural policies on saving, investment, and current accounts in OECD and non-OECD economies. Since the current account effects of structural reforms are often complex and ambiguous from a theoretical perspective, new OECD empirical analysis is carried out. Reduced-form equations are estimated for a panel of 30 OECD countries as well as for a panel/cross-section of 117 OECD and non- OECD countries that relate saving, investment and current accounts to policy indicators and a set of macroeconomic control variables. This work suggests that structural reforms may influence saving, investment and current accounts through their impact on macroeconomic conditions such as productivity growth or public revenues and expenditures, but also more directly: i) higher social spending (in particular on health care) is found to lower the saving rate and thereby to weaken the current account, most likely reflecting lower precautionary saving; ii) product market liberalisation temporarily boosts investment and thus also weakens the current account; iii) financial market deregulation may lower the saving rate, though only in less developed countries; iv) stricter employment protection may be associated with lower saving rates if unemployment benefits are low, as well as with higher investment rates possibly due to greater substitution of capital for labour. A scenario analysis indicates that fiscal consolidation and structural reforms in the main world economies could significantly reduce current global imbalances, possibly by about one-third. Keywords: Saving, investment, current account, social welfare system, labour market regulation, product market regulation, financial market regulation, taxation Journal: OECD Journal: Economic Studies Year: 2011 Pages: 1-44 Volume: 2011 Issue: 1 Handle: RePEc:oec:ecokac:5KG5825LKMVL Template-type: ReDIF-Article 1.0 Author-Name: Marion Devaux Author-Name: Franco Sassi Author-Name: Jody Church Author-Name: Michele Cecchini Author-Name: Francesca Borgonovi Title: Exploring the Relationship Between Education and Obesity Abstract: An epidemic of obesity has been developing in virtually all OECD countries over the last 30 years. Existing evidence provides a strong suggestion that such an epidemic has affected certain social groups more than others. In particular, a better education appears to be associated with a lower likelihood of obesity, especially among women. This paper sheds light on the nature and the strength of the correlation between education and obesity. Analyses of health survey data from Australia, Canada, England, and Korea were undertaken with the aim of exploring this relationship. Social gradients in obesity were assessed across the entire education spectrum, overall and in different population sub-groups. Furthermore, investigations testing for mediation effects and for the causal nature of the links observed were undertaken to better understand the underlying mechanisms of the relationship between education and obesity. Keywords: obesity, education, social disparities, mediation effect Journal: OECD Journal: Economic Studies Year: 2011 Pages: 1-40 Volume: 2011 Issue: 1 Handle: RePEc:oec:ecokac:5KG5825V1K23 Template-type: ReDIF-Article 1.0 Author-Name: Julien Dupont Author-Name: Dominique Guellec Author-Name: Joaquim Oliveira Martins Title: OECD Productivity Growth in the 2000s: A Descriptive Analysis of the Impact of Sectoral Effects and Innovation Abstract: This paper brings together the latest data and OECD productivity indicators in different areas with the aim of reviewing the main productivity trends over the past decade, comparing the United States, Europe and to some extent Japan. Concerning economy wide indicators of productivity, the slowdown appears to be due to a significant slowdown in investment in information and communication technologies (ICT) followed by a decrease in multi-factor productivity (MFP). However, a new set of indicators of MFP growth by industry shows that the decline of productivity is particularly marked in sectors such as construction and market services. Looking for possible explanations of the decline, a marked slowdown in innovation emerged as the most likely cause. It concludes that, if no new wave of innovation materialises, comparable in size to the one of the late 1990s (around notably the Internet), the OECD trend productivity growth is not likely to resume at its end-1990s level. Only a recovery in innovation itself could trigger a sustainable recovery in productivity in the major OECD countries. Keywords: Productivity, convergence, innovation, growth accounting Journal: OECD Journal: Economic Studies Year: 2011 Pages: 1-23 Volume: 2011 Issue: 1 Handle: RePEc:oec:ecokac:5KGF3281FMTC Template-type: ReDIF-Article 1.0 Author-Name: Rudiger Ahrend Author-Name: Cyrille Schwellnus Title: Do investors disproportionately shed assets of distant countries during global financial crises?: The role of increased uncertainty Abstract: The global crisis of 2008-09 went hand in hand with sharp fluctuations in capital flows. To some extent, these fluctuations may have been attributable to uncertainty-averse investors indiscriminately selling assets about which they had poor information, including those in geographically distant locations. Using a gravity equation setup, this article shows that the impact of distance increases with investors’ uncertainty aversion. Consistent with a sudden increase in uncertainty, the negative impact of distance on foreign holdings increased during the global financial crisis of 2008-09. Host-country structural policies enhancing the quality of information available to foreign investors, such as strict disclosure requirements and prudential bank regulation, tended to mitigate withdrawals. Journal: OECD Journal: Economic Studies Year: 2013 Pages: 1-20 Volume: 2012 Issue: 1 Handle: RePEc:oec:ecokac:5K4DPMW9HPHC Template-type: ReDIF-Article 1.0 Author-Name: Ray Barrell Author-Name: Dawn Holland Author-Name: Ian Hurst Title: Fiscal multipliers and prospects for consolidation Abstract: This article looks at various aspects of fiscal consolidation in 18 OECD economies. The prospects for fiscal consolidation depend upon the problems a country may face with its debt stock, the political will to deal with these problems and on the costs of consolidation. These costs are a function of the impacts of fiscal policy on the economy, which is the focus of this study. The analysis is based on a series of simulations using the National Institute Global Econometric Model, NiGEM. Fiscal multipliers differ across countries because the structure and behaviour of economies differ. They also differ within countries, depending on factors such as the fiscal instrument implemented, the policy response to fiscal innovations, and expectation formation by economic agents. The purpose of this study is to allow an assessment of the likely impact on the economy and on the fiscal position of consolidation programmes.We decompose the key factors that determine the size of the multiplier by changing them one at a time. Even under a specified set of assumptions, the outturn for the budget balance retains a high degree of uncertainty. We illustrate this uncertainty by calibrating probability bounds around projected debt profiles. This can allow an assessment of the probability of achieving specified fiscal targets, such as those set out in the European Union’s new Fiscal Compact. Journal: OECD Journal: Economic Studies Year: 2012 Pages: 71-102 Volume: 2012 Issue: 1 Handle: RePEc:oec:ecokac:5K8X6K5WC58X Template-type: ReDIF-Article 1.0 Author-Name: Pier Carlo Padoan Author-Name: Urban Sila Author-Name: Paul van den Noord Title: Avoiding debt traps: Fiscal consolidation, financial backstops and structural reforms Abstract: In this article we develop a simple and stylised analytical framework, which is both tractable and feasible to estimate, capturing several key dimensions of the sovereign debt crisis in Europe. We use it to examine if and how a combination of fiscal consolidation, structural reform and financial backstops can help countries, notably the southern euro-area countries, to escape from the debt trap. Our analysis confirms that the loss of fiscal policy space in countries trapped in bad dynamics inevitably requires that fiscal action be directed towards consolidation despite some output loss in the short run. In particular, reducing debt levels breeds stronger growth and results in lower sovereign risk premia. We identify also a very important role for structural reform to help countries escape from bad dynamics. Last but not least, we find that financial backstops are helpful, but only to “buy time”. This additional time must be used productively, for fiscal consolidation and structural reforms to bear fruit as well as to make progress with institutional reforms of the European monetary union. Journal: OECD Journal: Economic Studies Year: 2012 Pages: 151-177 Volume: 2012 Issue: 1 Handle: RePEc:oec:ecokac:5K8XBNJBN9HL Template-type: ReDIF-Article 1.0 Author-Name: Vincenzo Spiezia Title: ICT investments and productivity: Measuring the contribution of ICTS to growth Abstract: This study uses an econometric approach to estimate the contribution of three types of ICT investments (computer, software and communication) in 26 industries (the whole business sector) in 18 OECD countries over 1995-2007, based on the EU KLEMS Database. The estimated contribution of ICT investments to value added growth in the business sector varies from 1.0% a year in Australia to 0.4% a year in Japan. In one-third of the countries considered, the contribution of ICT investment was bigger or equal to the contribution of non-ICT investments. In most countries, computing equipment provided the largest contribution and accounted for over 50% of the overall ICT contribution. The only exceptions are Finland, where investments in communication equipment exceeded those in computing equipment, and Japan, where software was the most dynamic component of ICT investments. ICT producing industries account for no less than two-thirds of total factor productivity (TFP) growth in Germany, Slovenia and the United Kingdom, about 60% in the United States and just below 50% in France and the Netherlands. In Denmark, the Czech Republic and Italy, TFP increased in the ICT producing industries whereas it decreased for the total business sector. JEL classification: O47, E23, E22. Keywords: Growth accounting, ICT, GMM, EU KLEMS. Journal: OECD Journal: Economic Studies Year: 2012 Pages: 199-211 Volume: 2012 Issue: 1 Handle: RePEc:oec:ecokac:5K8XDHJ4TV0T Template-type: ReDIF-Article 1.0 Author-Name: Jean-Marc Fournier Author-Name: Isabell Koske Title: The determinants of earnings inequality: evidence from quantile regressions Abstract: Unconditional and conditional quantile regressions are used to explore the determinants of labour earnings at different parts of the distribution and, hence, the determinants of overall labour earnings inequality. The analysis combines several household surveys to provide comparable estimates for 32 countries. The empirical work suggests that, in general, a rise in the share of workers with an uppersecondary or post-secondary non-tertiary degree and a rise in the share of workers on permanent contracts are associated with a narrowing of the earnings distribution. By contrast, a shift in the sector composition of the economy is not found to have a large impact on overall earnings inequality. As for tertiary education, the impact remains ambiguous as there are several offsetting forces. Journal: OECD Journal: Economic Studies Year: 2012 Pages: 7-36 Volume: 2012 Issue: 1 Handle: RePEc:oec:ecokac:5K8ZS3TWBRD8 Template-type: ReDIF-Article 1.0 Author-Name: Margit Molnar Author-Workplace-Name: OECD Title: Fiscal consolidation: What factors determine the success of consolidation efforts? Abstract: The global economic and financial crisis exacerbated the need for fiscal consolidation in many OECD countries. Drawing lessons from past episodes of fiscal consolidation, this study investigates the economic environments, political settings and policy measures conducive to fiscal consolidation and debt stabilisation using probit, duration, truncated regression and bivariate Heckman selection methods. The empirical analysis builds on the earlier literature and extends it to include new aspects that may be of importance for consolidating governments. The empirical analysis confirms previous findings that the presence of fiscal rules – expenditure or budget balance rules – is associated with a greater probability of stabilising debt. Crucial in determining the causal link behind the association, the results also reveal an independent role for such rules over and above the impact of preferences for fiscal prudence. Also, while the analysis confirms that spending-driven adjustments visà- vis revenue-driven ones are more likely to stabilise debt, it also reveals that large consolidations need multiple instruments for consolidation to succeed. Sub-national governments, in particular state-level governments can contribute to the success of central government consolidation, if they co-operate. To ensure that state-level governments do co-operate, having the right regulatory framework with the extension of fiscal rules to sub-central government levels is important. Journal: OECD Journal: Economic Studies Year: 2012 Pages: 123-149 Volume: 2012 Issue: 1 Handle: RePEc:oec:ecokac:5K8ZS3TWGMJC Template-type: ReDIF-Article 1.0 Author-Name: David Turner Author-Name: Francesca Spinelli Title: Interest-rate-growth differentials and government debt dynamics Abstract: The differential between the interest rate paid to service government debt and the growth rate of the economy is a key concept in assessing fiscal sustanability. Among OECD economies,this differential was unusually low for much of the last decade compared with the 1980s and the first half of the 1990s. This article investigates the reasons behind this profile using panel estimation on selected OECD economies as means of providing some guidance as to its future development. The results suggest that the fall is partly explained by lower inflation volatility associated with the adoption of monetary policy regimes credibly argeting low inflation,which might be expected to continue. However,the low differential is also partly explained by factors which are likely to be reversed in the future,including very low policy rates,the “global savings glut” and the effect which the European Monetary Union had in reducing long-term interest differentials in the pre-crisis period. The differential is also likely to rise in the future because the number of countries which have debt-to-GDP ratios above a threshold at which there appears to be an effect on sovereign risk premia has risen sharply. Moreover,debt is projected to increasingly rise above this threshold in most of these countries. Journal: OECD Journal: Economic Studies Year: 2012 Pages: 103-122 Volume: 2012 Issue: 1 Handle: RePEc:oec:ecokac:5K912K0ZKHF8 Template-type: ReDIF-Article 1.0 Author-Name: Isabelle Joumard Author-Email: isabelle.joumard@oecd.org Author-Workplace-Name: OECD Author-Name: Mauro Pisu Author-Workplace-Name: OECD Author-Name: Debra Bloch Author-Workplace-Name: OECD Title: Tackling income inequality: The role of taxes and transfers Abstract: Taxes and transfers reduce inequality in disposable income relative to market income. The effect varies, however, across OECD countries. The redistributive impact of taxes and transfers depends on the size, mix and the progressivity of each component. Some countries with a relatively small tax and welfare system (e.g. Australia) achieve the same redistributive impact as countries characterised by much higher taxes and transfers (e.g. Germany) because they rely more on income taxes, which are more progressive than other taxes, and on means-tested cash transfers. This article provides an assessment of the redistributive effect of the main taxes and cash transfers, based on various OECD data sources, a set of policy indicators and a literature review. Using cluster analysis, it also identifies empirically four groups of countries with tax and transfer systems that share broadly similar features. Journal: OECD Journal: Economic Studies Year: 2012 Pages: 37-70 Volume: 2012 Issue: 1 Handle: RePEc:oec:ecokac:5K95XD6L65LT Template-type: ReDIF-Article 1.0 Author-Name: Boris Cournède Author-Name: Antoine Goujard Author-Name: Álvaro Pina Title: Reconciling fiscal consolidation with growth and equity Abstract: Despite sustained efforts made in recent years to rein in budget deficits, a majority of OECD countries still face substantial public finance consolidation needs. While essential to avoid the disruption and large costs ultimately associated with unsustainable public finances, fiscal consolidation complicates the task of achieving other policy goals. In most cases, it weighs on demand in the short term. And, if too little attention is paid to the mix of instruments used to achieve consolidation, it can undermine long-term growth, exacerbate income inequality and slow the process of global rebalancing. It is therefore important for governments to adopt consolidation strategies that minimise these adverse side-effects. The analysis proposes consolidation strategies that take into account other policy goals as well as country-specific circumstances and preferences. To do so, increases in particular taxes and cuts in specific spending areas are assessed for their effects on short- and long-term growth, income distribution and external accounts. The results of detailed illustrative simulations indicate that a significant number of OECD countries may have to raise harmful taxes or cut valuable spending areas to deliver sufficient consolidation, underscoring the need for structural reforms to counteract these side-effects. The results are robust to an extensive range of sensitivity checks. Journal: OECD Journal: Economic Studies Year: 2014 Pages: 7-89 Volume: 2013 Issue: 1 Handle: RePEc:oec:ecokac:5JZB44VZBKHD Template-type: ReDIF-Article 1.0 Author-Name: Łukasz Rawdanowicz Title: Choosing the pace of fiscal consolidation Abstract: In many OECD countries debt has soared to levels threatening fiscal sustainability, necessitating its reduction over the medium to longer term. This paper proposes a stylised model, featuring endogenous interactions between fiscal policy, growth and financial markets, to highlight how economic shocks and structural features of an economy can affect consolidation strategy and resulting growth and inflation developments. The fiscal authorities are assumed to choose a consolidation path from a predetermined set of possible paths by maximising cumulative GDP growth and minimising cumulative squared output gaps, with the objective to reach a given debtto- GDP level within a finite horizon and stabilise debt afterwards under the assumption of the unchanged fiscal policy stance. Illustrative simulations for a hypothetical economy show, among other things, that by requiring debt to stabilise part of the initial adjustment can be reversed; some stepping up of the fiscal adjustment can be optimal if bond yields increase due to an exogenous shock; and for some debt reduction targets, high fiscal multipliers, hysteresis effects and higher government bond yields imply protracted deflation and large negative output gaps, stressing the need to select reasonable fiscal targets consistent with market conditions. JEL classification: E61, E62, H6 Keywords: Fiscal consolidation, sovereign debt, government budget balance, fiscal rules Journal: OECD Journal: Economic Studies Year: 2014 Pages: 91-119 Volume: 2013 Issue: 1 Handle: RePEc:oec:ecokac:5K3TQ96MBR44 Template-type: ReDIF-Article 1.0 Author-Name: Ben Westmore Title: Policy incentives for private innovation and maximising the returns Abstract: This paper uses panel regression techniques to assess the policy determinants of private-sector innovative activity – proxied by R&D expenditure and the number of new patents – across 19 OECD countries. The relationship between innovation indicators and multifactor productivity (MFP) growth is also examined with a particular focus on the role of public policies in influencing the returns to new knowledge. The results establish an empirical link between R&D and patenting, as well as between these measures of innovation intensity and MFP growth. Innovation-specific policies such as R&D tax incentives, direct government support and patent rights are found to be successful in encouraging the innovative activities associated with higher productivity growth. However, direct empirical evidence of the positive effects of these policies on productivity is less forthcoming. A pervasive theme from the analysis is the importance of coupling policies aimed at encouraging innovation or technological adoption with well-designed framework policies that allow knowledge spillovers to proliferate. In particular, the settings of framework policies relating to product market regulation, openness to trade and debtor protection in bankruptcy provisions are found to be important for the diffusion of new technologies. JEL classification: L20, O30, O40 Keywords: Intangible assets, innovation, productivity growth, public policy Journal: OECD Journal: Economic Studies Year: 2014 Pages: 121-163 Volume: 2013 Issue: 1 Handle: RePEc:oec:ecokac:5K3TRMJLHXZQ Template-type: ReDIF-Article 1.0 Author-Name: Anna Cristina D’Addio Author-Name: Simon Chapple Author-Name: Andreas Hoherz Author-Name: Bert Van Landeghem Title: Using a quasi-natural experiment to identify the effects of birth-related leave policies on subjective well-being in Europe Abstract: The purpose of this paper is to examine the welfare effects of birth-related leave (BRL) in terms of life satisfaction. To do so, we exploit variations in BRL policies to assess their impact on life satisfaction. The paper adds to the existing literature in various ways. First, it uses new data collected by Baldi et al. (2011) and Baldi and Chapple (2010) to describe how life satisfaction moves around the date of the reforms over time and in a number of EU countries covered in the Eurobarometer surveys. Second, the paper analyses the relation between life satisfaction and BRL in Germany and the United Kingdom with long individual panel data collected with the GSOEP and the BHPS survey. The potential endogeneity bias of the treatment effect is addressed by building a quasi-natural experiment using policy changes as the assignment rule. The results from a variety of different methods suggest that BRL polices generally have a significant positive effect on life satisfaction. Women on BRL have higher life satisfaction, controlling for observable and unobservable personal characteristics. This result is robust to alternative specifications. JEL classification: H53, I16, J38 Keywords: Welfare, subjective well-being, difference-in-difference, birth-related leaves Journal: OECD Journal: Economic Studies Year: 2014 Pages: 235-268 Volume: 2013 Issue: 1 Handle: RePEc:oec:ecokac:5K3TVTG6FVMQ Template-type: ReDIF-Article 1.0 Author-Name: Miyako Ikeda Author-Name: Emma García Title: Grade repetition: A comparative study of academic and non-academic consequences Abstract: This article explores country-by-country differences in academic performance and attitudes towards school between students who repeated a grade in primary school, in secondary school or never repeated a grade. The analyses use PISA 2009 for 30 countries in which a relatively high proportion of students repeated a grade before the age of 15. The comparisons across countries and the examination of models of both academic and non-academic performance contribute to shed some light on the consequences of repeating a grade for students. The estimated associations suggest that in most countries examined, at the age of 15, students who repeated a grade in secondary school tend to perform better academically than do students who repeated a grade in primary school, but worse than non-repeaters. In terms of the measure of behavioural performance chosen for this analysis, attitudes towards school, in the majority of countries, non-repeaters tend to report more positive attitudes towards schools than primary and secondary-school repeaters, but the comparison between repeaters in primary and secondary schools shows less consistent patterns across countries. These differences are observed after accounting for background characteristics of the students and exploring some differential relationships between grade repetition and education outcomes according to student characteristics. The achievement and behavioural gaps among groups of repeaters may reflect differences in the development of academic and behavioural skills over the school years, as well as differences in the way these groups of students are treated across different educational systems. Journal: OECD Journal: Economic Studies Classification-JEL: H52; I21; J13 Year: 2014 Pages: 269-315 Volume: 2013 Issue: 1 Handle: RePEc:oec:ecokac:5K3W65MX3HNX Template-type: ReDIF-Article 1.0 Author-Name: Rob Dellink Author-Name: Stéphanie Jamet Author-Name: Jean Chateau Author-Name: Romain Duval Title: Towards global carbon pricing: Direct and indirect linking of carbon markets Abstract: Emissions trading systems (ETS) can play a major role in a cost-effective climate policy framework. Both direct linking of ETSs and indirect linking through a common crediting mechanism can reduce costs of action.We use a global recursive-dynamic computable general equilibrium model to assess the effects of direct and indirect linking of ETS systems across world regions. Linking of domestic Annex I ETSs leads to moderate aggregate cost savings, as differences in domestic permit prices are limited. Countries benefit directly from linking by either buying permits and avoiding investing in highcost mitigation options, or by exploiting relatively cheap mitigation options and selling permits at a higher price. Although the economy of the main permit sellers, such as Russia, is negatively affected by the real exchange rate appreciation that is induced by the large export of permits, on balance they also still benefit from linking. The costsaving potential for developed countries of well-functioning crediting mechanisms appears to be very large. Even limited use of credits would nearly halve mitigation costs; cost savings would be largest for carbon-intensive economies. However, one open issue iswhether these gains can be fully reaped in reality, given that direct linking and the use of crediting mechanisms both raise complex system design and implementation issues. The analysis in this paper shows, however, that the potential gains to be reaped are so large, that substantial efforts in this domain are warranted. JEL classification: H23, O41, Q54 Keywords: Climate mitigation policy, emissions trading systems, general equilibrium models, linking carbon markets Journal: OECD Journal: Economic Studies Year: 2014 Pages: 209-234 Volume: 2013 Issue: 1 Handle: RePEc:oec:ecokac:5K421KK9J3VB Template-type: ReDIF-Article 1.0 Author-Name: Wen-Hao Chen Author-Name: Michael Förster Author-Name: Ana Llena-Nozal Author-Email: ana.llenanozal@oecd.org Title: Demographic or labour market trends: What determines the distribution of household earnings in OECD countries? Abstract: This article assesses various underlying driving factors for the evolution of household earnings inequality for 23 OECD countries from the mid-1980s to the mid-2000s. There are a number of factors at play. Some are related to labour market trends – increasing dispersion of individual wages and changes in men’s and women’s employment rates. Others relate to shifts in household structures and family formation – more single-headed households and increased earnings correlation among partners in couples. The contribution of each of these factors is estimated using a semi parametric decomposition technique. The results reveal that marital sorting and household structure changes contributed, albeit moderately, to increasing household earnings inequality, while rising women’s employment exerted a sizable equalising effect. However, changes in labour market factors, in particular increases in men’s earnings disparities, were identified as the main driver of household earnings inequality, contributing between one-third and one-half to the overall increase in most countries. Sensitivity analysis applying a reversedorder decomposition suggests that these results are robust. Journal: OECD Journal: Economic Studies Classification-JEL: D31; I30; J12; J22 Year: 2014 Pages: 179-207 Volume: 2013 Issue: 1 Handle: RePEc:oec:ecokac:5K43JT5VCDVL Template-type: ReDIF-Article 1.0 Author-Name: Javad Abedini Title: Technological effects of intra-OECD trade in manufacturing: A panel data analysis over the period 1988-2008 Abstract: This article seeks to study how intra-OECD trade in manufacturing goods has affected technological heterogeneity across member states during 1988-2008. To this aim, we derive a panel data version of the Eaton and Kortum (2002) normalised trade model to estimate, annually, the technological heterogeneity of OECD countries. We find a gradual technological convergence across the group as the sensitivity of intra-group trade to price factors increases over time. However, the results diverge when considering European and non-European OECD sub-samples, separately. We find that technological convergence is not an automatic result of intra-group trade but, for that, a more general programme of economic liberalisation, including free movement of capital and labour, is also required. Journal: OECD Journal: Economic Studies Classification-JEL: F13; F15; F33 Year: 2014 Pages: 165-177 Volume: 2013 Issue: 1 Handle: RePEc:oec:ecokac:5K49LCH54V8N Template-type: ReDIF-Article 1.0 Author-Name: Patrice Ollivaud Author-Name: David Turner Title: The effect of the global financial crisis on OECD potential output Abstract: Potential output losses from the global financial crisis are estimated by comparing recent OECD published projections with a counter-factual assuming a continuation of pre-crisis productivity trends and a trend employment rate which is sensitive to demographic trends. Among the 19 OECD countries which experienced a banking crisis over the period 2007-11 the median loss in potential output in 2014 is estimated to be about 5½ per cent, compared with a loss in aggregate potential output across all OECD countries of about 3½ per cent. The loss does, however, vary widely across countries, being more than 10% for several smaller European, mainly euro area, countries. The largest adverse effects come from lower trend productivity, which is a combination of both lower total factor productivity and lower capital per worker. Despite large increases in structural unemployment in some countries, the contribution of lower potential employment is limited because the adverse effect on labour force participation is generally much less than might have been expected on the basis of previous severe downturns. This may partly reflect pension reforms and a tightening up of early retirement pathways. Pre-crisis conditions relating to over-heating and financial excesses, including high inflation, high investment, large current account deficits, high total economy indebtedness and more rapid growth in capital-per-worker are all correlated with larger post-crisis potential output losses. This suggests that underlying the potential output losses was a substantial misallocation of resources, especially of capital, in the pre-crisis boom period. On the other hand, more competition-friendly product market regulation is associated with smaller losses of potential output, suggesting that it facilitates a reallocation of resources across firms and sectors in the aftermath of an adverse shock and so helps to mitigate its consequences. JEL classification: E32; E44. Keywords: Banking crisis, financial crisis, global financial crisis, potential output. Journal: OECD Journal: Economic Studies Classification-JEL: E32; E44 Year: 2015 Pages: 41-60 Volume: 2014 Issue: 1 Handle: RePEc:oec:ecokac:5JS64L2BV0ZV Template-type: ReDIF-Article 1.0 Author-Name: OECD Author-Name: Elena Rusticelli Title: Rescuing the Phillips curve: Making use of long-term unemployment in the measurement of the NAIRU Abstract: Despite the increased importance of cyclically-adjusted measures of labour market slack for policymaking, estimates of the NAIRU have become increasingly fragile. Particularly for euro area countries, NAIRU estimates represent a crucial input to compute cyclically-adjusted budget balances adopted to formulate medium-term fiscal objectives under the EU fiscal surveillance framework. However, the apparent reduced sensitivity of inflation to labour market dynamics and unemployment gaps seriously undermines the use of Phillips curve equations in estimating the NAIRU. Estimates of the NAIRU are particularly problematic when changes in unemployment are both very large and rapid as in the aftermath of the global crisis. This paper proposes a refinement to the standard OECD approach of using a Kalman filter to estimate the NAIRU in the context of the Phillips curve. The proposed refinement strengthens the relationship between inflation and labour market developments by considering the risk of hysteresis effects associated with changes in long-term unemployment. Testing the revised methodology on a broad selection of OECD countries gives mixed results. For a group of countries in the euro area periphery (Greece, Ireland, Italy, Portugal and Spain) there is an increase in the magnitude and statistical significance of the unemployment gap, with the NAIRU revised upward by on average 1¾ percentage points. However, the revised methodology provides less improvement to the standard OECD methodology for a second set of countries considered, namely the G7 excluding Italy. The United States is an interesting intermediate case as the statistical evidence for the proposed methodology is marginal, but the policy implications of the revised point estimate of the NAIRU are major. JEL classification: C32, E24, E31, E32, J64. Keywords: Long-term unemployment, flattening Phillips curve, NAIRU, euro area periphery, Kalman filter. Journal: OECD Journal: Economic Studies Year: 2014 Pages: 109-127 Volume: 2014 Issue: 1 Handle: RePEc:oec:ecokac:5JXRCM2CDFF6 Template-type: ReDIF-Article 1.0 Author-Name: Christine Lewis Author-Name: Nigel Pain Title: Lessons from OECD forecasts during and after the financial crisis Abstract: This paper assesses the OECD’s projections for GDP growth and inflation during the global financial crisis and recovery, focusing on lessons that can be learned. Growth was repeatedly overestimated in the projections, which failed to anticipate the extent of the slowdown and later the weak pace of the recovery. Similar errors were made by many other forecasters. At the same time, inflation was stronger than expected on average. Analysis of the growth errors shows that the OECD projections in the crisis years were larger in countries with more international trade openness and greater presence of foreign banks. In the recovery, there is little evidence that an underestimate of the impact of fiscal consolidation contributed significantly to forecast errors. Instead, the repeated conditioning assumption that the euro area crisis would stabilise or ease played an important role, with growth weaker than projected in European countries where bond spreads were higher than had been assumed. But placing these errors in a historical context illustrates that the errors were not without precedent: similar-sized errors were made in the first oil price shock of the 1970s. In response to the challenges encountered in forecasting in recent years and the lessons learnt, the OECD and other international organisations have sought to improve their forecasting techniques and procedures, to improve their ability to monitor near-term developments and to better account for international linkages and financial market developments. JEL classification: E17, E27, E32, E37, E62, E66, F47, G01 Keywords: Forecasting, economic outlook, economic fluctuations, fiscal policy Journal: OECD Journal: Economic Studies Year: 2014 Pages: 9-39 Volume: 2014 Issue: 1 Handle: RePEc:oec:ecokac:5JXRCM2GLC7J Template-type: ReDIF-Article 1.0 Author-Name: Yvan Guillemette Author-Name: Jan Stráský Title: Japan's challenging debt dynamics Abstract: A small simulation model is used to evaluate the contribution that the three arrows of the government’s strategy – bold monetary policy to achieve higher inflation, flexible fiscal policy and growth-boosting structural reforms – could make to reversing the rise in Japan’s public debt ratio, currently about 230% of GDP. The findings indicate that with fiscal consolidation amounting to around 7½ percentage points of GDP by 2020, modestly higher growth coming from increased female labour force participation and higher productivity growth, as well as inflation gradually rising to 2% thanks to unconventional monetary policy measures, the debt ratio could be put on a downward trajectory by the end of this decade, although it is likely to remain above 200% of GDP in 2035. Among the many uncertainties surrounding this scenario, the risk of a larger-than-projected increase in interest rates stands prominently and could prevent the turnaround in debt dynamics. JEL classification codes: E63; H68. Keywords: Japan; debt; deficit; fiscal; budget; projection; simulation; arrow; consolidation; growth; inflation; reform. Journal: OECD Journal: Economic Studies Year: 2014 Pages: 97-108 Volume: 2014 Issue: 1 Handle: RePEc:oec:ecokac:5JXVBSSQSVMV Template-type: ReDIF-Article 1.0 Author-Name: Edmund Amann Author-Name: Swati Virmani Title: Foreign direct investment and reverse technology spillovers: The effect on total factor productivity Abstract: The paper analyses the “feedback effect” of Foreign Direct Investment (FDI) on Total Factor Productivity (TFP) growth in emerging economies via technology spillovers across borders. We study the effect of R–D spillovers resulting from outward FDI flows from 18 emerging economies into 34 OECD countries over the 1990-2010 period, comparing the impact with that of spillovers resulting from inward FDI flows. The result confirms that FDI enhances productivity growth; however the impact is much larger when R-D-intensive developed countries invest in the emerging economies than the other way round. Country-specific bilateral elasticities also support this outcome. JEL classification: F210, F430, F620, O470. Keywords: Outward FDI, Inward FDI, Reverse technology spillovers, Total factor productivity. Journal: OECD Journal: Economic Studies Classification-JEL: F21; F43; F62; O47 Year: 2014 Pages: 129-153 Volume: 2014 Issue: 1 Handle: RePEc:oec:ecokac:5JXX56VCXN0N Template-type: ReDIF-Article 1.0 Author-Name: Christine de la Maisonneuve Author-Name: Joaquim Oliveira Martins Title: The future of health and long-term care spending Abstract: This paper proposes a new set of public health and long-term care expenditure projections until 2060, following up on the previous set of projections published in 2006. It disentangles health from long-term care expenditure as well as the demographic from the non-demographic drivers, and refines the previous methodology, in particular by better identifying the underlying determinants of health and long-term care spending and by extending the country coverage to include BRIICS countries. A cost-containment and a cost-pressure scenario are provided together with sensitivity analysis. On average across OECD countries, total health and long-term care expenditure is projected to increase by 3.3 and 7.7 percentage points of GDP between 2010 and 2060 in the cost-containment and the cost-pressure scenarios, respectively. For the BRIICS over the same period, it is projected to increase by 2.8 and 7.3 percentage points of GDP in the costcontainment and the cost-pressure scenarios, respectively. Keywords: Public health expenditures, long-term care expenditures, ageing populations, longevity, demographic and non-demographic effects, projection methods. Journal: OECD Journal: Economic Studies Classification-JEL: H51; I12; J11; J14 Year: 2014 Pages: 61-96 Volume: 2014 Issue: 1 Handle: RePEc:oec:ecokac:5JZ0V44S66NW Template-type: ReDIF-Article 1.0 Author-Name: Tomasz Kozluk Author-Name: Vera Zipperer Title: Environmental policies and productivity growth: a critical review of empirical findings Abstract: The economic effects of environmental policies are of central interest to policymakers. The traditional approach sees environmental policies as a burden on economic activity, at least in the short to medium term, as they raise costs without increasing output and restrict the set of production technologies and outputs. At the same time, the Porter Hypothesis claims that well-designed environmental policies can provide a “free lunch” – encouraging innovation, bringing about gains in profitability and productivity that can outweigh the costs of the policy. This paper reviews the empirical evidence on the link between environmental policy stringency and productivity growth, and the various channels through which such effects can take place. The results are ambiguous, in particular as many of the studies are fragile and context-specific, impeding the generalisation of conclusions. Practical problems related to data, measurement and estimation strategies are discussed, leading to suggestions as to how they can be addressed in future research. These include: improving the measurement of environmental policy stringency; investigating effects of different types of instruments and details of instrument design; exploiting cross-country variation; and the complementary use of different levels of aggregation. Keywords: Environmental policy, Porter Hypothesis, Productivity, Innovation Journal: OECD Journal: Economic Studies Classification-JEL: D24; O31; O47; Q50; Q55; Q58 Year: 2014 Pages: 155-185 Volume: 2014 Issue: 1 Handle: RePEc:oec:ecokac:5JZ2DRQML75J Template-type: ReDIF-Article 1.0 Author-Name: Ben Westmore Title: International migration: The relationship with economic and policy factors in the home and destination country Abstract: This paper uses data of the high-skilled and low-skilled migrant stock between 92 origin and 44 destination countries to highlight the relationship between economic factors and international migration. It also attempts to uncover links with policy and demographic factors prevailing in the origin and destination countries. The analysis suggests that higher skill-specific wages in the destination are associated with more migration. This relationship appears to be particularly strong for migrants from middle-income countries, supporting theories of an inverted-U relationship between origin country economic development and the propensity to migrate. Policy differences between the destination and origin also appear important, for example in terms of regulations on businesses and labour markets, along with the relative quality of legal institutions. In some instances, the effects on high-skilled and low-skilled migrants differ markedly. JEL classification codes: F22, J01, O15 Keywords: International migration, labour economics, economic development, public policy Journal: OECD Journal: Economic Studies Classification-JEL: F22; J01; O15 Year: 2015 Pages: 101-122 Volume: 2015 Issue: 1 Handle: RePEc:oec:ecokac:5JRP104JPZ7J Template-type: ReDIF-Article 1.0 Author-Name: Elena Rusticelli Author-Name: David Turner Author-Name: Maria Chiara Cavalleri Title: Incorporating anchored inflation expectations in the Phillips curve and in the derivation of OECD measures of the unemployment gap Abstract: Inflation has become much less sensitive to movements in unemployment in recent decades. A common explanation for this change is that inflation expectations have become better anchored as a consequence of credible inflation targeting by central banks. In order to evaluate this hypothesis, the paper compares two competing empirical specifications across all OECD economies, where competing specifications correspond to the “former” and “new” specification for deriving measures of the unemployment gap which underlie the OECD Economic Outlook projections. The former OECD specification can be characterised as a traditional “backward-looking” Phillips curve, where current inflation is partly explained by an autoregressive distributed lag process of past inflation representing both inertia and inflation expectations formed on the basis of recent inflation outcomes. Conversely, the new approach adjusts this specification to incorporate the notion that inflation expectations are anchored around the central bank’s inflation objective. The main finding of the paper is that the latter approach systematically out-performs the former for an overwhelming majority of OECD countries over a recent sample period. Relative to the backward-looking specification, the anchored expectations approach also tends to imply larger unemployment gaps for those countries for which actual unemployment has increased the most. Moreover, the anchored expectations Phillips curve reduces real-time revisions to the unemployment gap, although these still remain uncomfortably large, in the case of countries where there have been large changes in unemployment. JEL classification: C22, E24, E31, J64 Keywords: Anchored expectations, Phillips curve, equilibrium unemployment, real-time revisions Journal: OECD Journal: Economic Studies Classification-JEL: C22; E24; E31; J64 Year: 2015 Pages: 299-331 Volume: 2015 Issue: 1 Handle: RePEc:oec:ecokac:5JRP104KJGMR Template-type: ReDIF-Article 1.0 Author-Name: Henrik Braconier Author-Name: Giuseppe Nicoletti Author-Name: Ben Westmore Title: Policy challenges for the next 50 years Abstract: This paper identifies and analyses some key challenges that OECD and partner economies may face over the coming 50 years if underlying global trends relating to growth, trade, inequality and environmental pressures prevail. It highlights the growing need for international policy coordination and cooperation in a number of areas. For example, global growth is likely to slow and become increasingly dependent on the diffusion of knowledge and technology, while the economic costs of environmental damages will mount. The rising economic importance of knowledge will tend to raise returns to skills, likely leading to further increases in earning inequalities within countries. While increases in pre-tax earnings do not automatically transform into rising income inequality, the ability of governments to cushion this impact may be limited, as rising trade integration and consequent rising mobility of tax bases combined with substantial fiscal pressures may hamper such efforts. The paper discusses to what extent national structural policies and heightened international cooperation can address these and other interlinked challenges over the coming 50 years. JEL classification: F, H, I2, I3, J1, O3, O4, Q5 Keywords: Global economy, growth, technological change, inequality, income distribution, immigration, environmental damages, climate change, tertiary education, fiscal consolidation, structural reforms, interdependence, co-ordination, projections Journal: OECD Journal: Economic Studies Classification-JEL: F; H; I2; I3; J1; O3; O4; Q5 Year: 2015 Pages: 9-66 Volume: 2015 Issue: 1 Handle: RePEc:oec:ecokac:5JRP104KJN5J Template-type: ReDIF-Article 1.0 Author-Name: Boris Cournède Author-Name: Paula Garda Author-Name: Volker Ziemann Title: Effects of economic policies on microeconomic volatility Abstract: Economic policies shape how much people earn, as well as how stable their income and jobs are. The level and stability of earnings both matter for well-being. Standard economic aggregates do not measure accurately the economic uncertainty which households are facing. This paper shows that household-level economic instability is only very loosely related to macroeconomic volatility. It uses several household-level databases to document how structural reforms aimed at boosting growth influence household-level economic stability. Movement from less to more productive processes and firms is at the heart of economic growth, which suggests a trade-off between growth and micro-level stability. Certain policy changes boost growth but increase micro-level instability: they include reductions in tax progressivity or social transfers (including unemployment benefits), as well as moves from very to moderately tight restrictions on the flow of goods and services and on the firing of regular workers. However, the analysis also uncovers that moving to highly competitive policies in general reduces micro-level instability. This finding points to a case for comprehensive rather than marginal reform in tightly regulated countries, since a comprehensive agenda can deliver higher growth without the instability costs that a more marginal reform can entail. JEL classification: D12, D22, J08, O40 Keywords: Stability, households, economic growth, reforms, microdata Journal: OECD Journal: Economic Studies Classification-JEL: D12; D22; J08; O40 Year: 2015 Pages: 179-225 Volume: 2015 Issue: 1 Handle: RePEc:oec:ecokac:5JRP38ST90NV Template-type: ReDIF-Article 1.0 Author-Name: Patrice Ollivaud Author-Name: Cyrille Schwellnus Title: Does the post-crisis weakness of global trade solely reflect weak demand? Abstract: Global trade growth over the past few years has appeared extraordinarily weak, even in relation to weak global GDP growth. This paper shows that the apparent breakdown in the relationship between global trade and global GDP growth is largely explained by two factors: an inappropriate measurement of global GDP and extraordinary demand weakness in the euro area. As a measure of demand for traded goods, global GDP at market exchange rates is more appropriate than the conventional purchasing power parity-based measure. Moreover, extraordinary demand weakness in the euro area – which is a particularly trade intensive region – has had a substantial negative effect on intra-euro area trade flows, which are commonly counted towards global trade. When global GDP is measured at market exchange rates and intra-euro area flows are removed from the measure of global trade, econometric estimations suggest that over the past 15 years the long-term elasticity of global trade to GDP has been similar to that of the 1990s. Indeed, the overwhelming part of postcrisis trade weakness can be attributed to weak global demand rather than structural changes, according to the econometric estimations in this paper and supporting evidence on changes in global investment, international production fragmentation and protectionism. Keywords: Global trade, trade elasticity, forecasting Journal: OECD Journal: Economic Studies Classification-JEL: C53; F10; F17 Year: 2015 Pages: 269-267 Volume: 2015 Issue: 1 Handle: RePEc:oec:ecokac:5JRQ9TZBWKR3 Template-type: ReDIF-Article 1.0 Author-Name: Orsetta Causa Author-Name: Alain de Serres Author-Name: Nicolas Ruiz Title: Can pro-growth policies lift all boats?: An analysis based on household disposable income Abstract: In a majority of OECD countries, GDP growth over the past three decades has been associated with growing income disparities. To shed some lights on the potential sources of trade-offs between growth and equity, this paper investigates the long-run impact of structural reforms on GDP per capita and household income distribution. Pro-growth reforms can be distinguished according to whether they are found to generate an increase or a reduction in household disposable income inequality. Those that contribute to reduce inequality include the reduction in regulatory barriers to competition, trade and FDI, as well as the stepping-up in job search assistance and training programmes. Conversely, a tightening of unemployment benefits for the long-term unemployed is found to lift mean household income but to lower income among poorer households, thus raising inequality. Several other reforms have no significant impact on income distribution. JEL Classification: 047, D37, E61 Keywords: Growth, inequality, pro-growth policies Journal: OECD Journal: Economic Studies Classification-JEL: E61; O47 Year: 2015 Pages: 227-268 Volume: 2015 Issue: 1 Handle: RePEc:oec:ecokac:5JRQHBB1T5JB Template-type: ReDIF-Article 1.0 Author-Name: Stijn Broecke Title: Experience and the returns to education and skill in OECD countries: Evidence of employer learning? Abstract: Using the Survey of Adult Skills (PIAAC), this paper documents how the returns to education and skill change with experience for a sample of 22 OECD countries. It does this within the framework of the Altonji and Pierret (2001) employer learning model, and therefore also tests the relevance of this theory in a wide range of countries using comparable data and a consistent methodology. Significant heterogeneity is found in the experience profiles of the returns to education and skill across countries, and convincing evidence in support of the employer learning theory is only found in a sub-set of the countries analysed. While these countries vary significantly from one another in terms of their labour market institutions and educational systems, the analysis does seem to suggest that employer learning is most common in those countries where employment protection legislation on temporary contracts is weak. This is consistent with a model in which temporary contracts allow employers to test and learn about young workers, and give them the flexibility to adjust wages in line with observed productivity. JEL codes: J24, J32, D83 Keywords: Employer learning, returns to education, returns to skill Journal: OECD Journal: Economic Studies Classification-JEL: D84; J24; J32 Year: 2015 Pages: 123-147 Volume: 2015 Issue: 1 Handle: RePEc:oec:ecokac:5JRS3SQRVZG5 Template-type: ReDIF-Article 1.0 Author-Name: Jean Chateau Author-Name: Lionel Fontagné Author-Name: Jean Fouré Author-Name: Åsa Johansson Author-Name: Eduardo Olaberría Title: Trade patterns in the 2060 world economy Abstract: This paper presents long-term trade scenarios for the world economy up to 2060 based on a modelling approach that combines aggregate growth projections for the world with a detailed computable general equilibrium sectoral trade model. The analysis suggests that over the next 50 years, the geographical centre of trade will continue to shift from OECD to non-OECD regions reflecting faster growth in non-OECD countries. The relative importance of different regions in specific export markets is set to change markedly over the next half century with emerging economies gaining export shares in manufacturing and services. Trade liberalisation, including gradual removal of tariffs, regulatory barriers in services and agricultural support, as well as a reduction in transaction costs on goods, could increase global trade and GDP over the next 50 years. Specific scenarios of regional liberalisation among a core group of OECD countries or partial multilateral liberalisation could, respectively, raise trade by 4% and 15% and GDP by 0.6% and 2.8% by 2060 relative to the status quo. Finally, the model highlights that investment in education has an influence on trade and high-skill specialisation patterns over the coming decades. Slower educational upgrading in key emerging economies than expected in the baseline scenario could reduce world exports by 2% by 2060. Lower up-skilling in emerging economies would also slow down the restructuring towards higher value-added activities in these emerging economies. JEL classification codes: E23, E27, F02, F17, F47 Keywords: General equilibrium trade model, long-term trade and specialisation patterns, trade liberalisation Journal: OECD Journal: Economic Studies Classification-JEL: E23; E27; F02; F17; F47 Year: 2015 Pages: 67-100 Volume: 2015 Issue: 1 Handle: RePEc:oec:ecokac:5JRS63LLQGJL Template-type: ReDIF-Article 1.0 Author-Name: Anna Cristina D’Addio Title: The dynamics of social expenditures over the cycle: A comparison across OECD countries Abstract: This paper studies the cyclical behaviour of public social spending in 20 OECD countries observed over the period between 1982 and 2011. In view of the recent discussion on cutting the budget deficit, the paper pays particular attention to whether social spending is pro-cyclical or countercyclical, whether it changes asymmetrically during expansions and recessions and whether the asymmetric changes in social spending contribute to a drift in social expenditures over time. The links between social spending levels and key economic variables, such as economic growth, provide also a useful context for discussing current social expenditure trends. The estimates, based on a system-GMM estimator, suggest that an upward ratchet effect exists. The effect is robust to a large number of alternative specifications. JEL classification: E32, E62, H50, I00 Keywords: Fiscal policy, economic cycles, social spending, ratchet effect Journal: OECD Journal: Economic Studies Classification-JEL: E32; E62; H50; I00 Year: 2015 Pages: 149-178 Volume: 2015 Issue: 1 Handle: RePEc:oec:ecokac:5JRS63LPKMXR Template-type: ReDIF-Article 1.0 Author-Name: Martin Larch Author-Name: Kristin Magnusson Bernard Author-Name: Peter McQuade Title: Fortune or fortitude? Determinants of successful adjustment with IMF programs Abstract: Full adjustment programs in the wake of crisis episodes exact a major toll on a country’s economy, yet not all are blessed with success.We identify adjustment needs by a country’s decision to approach the IMF for official assistance.We then investigate the factors conducive to successful exit from official assistance during more than 170 adjustment episodes by means of a panel regression framework. In contrast to the existing literature, we do not use absolute benchmarks. We define success as a resumption of real GDP growth and a reduction of government debt compared to the pre-program period. Our econometric results suggest stringent policy action do play a role for the probability of success. At the same time, we also find that successful exit also very much depends on supportive external conditions and, linked to that, the degree of openness of an economy. JEL classification: E61, F33, G01, H81 Keywords: Fiscal adjustment, financial crises, IMF lending                                                     Journal: OECD Journal: Economic Studies Classification-JEL: E61; F33; G01; H81 Year: 2017 Pages: 37-69 Volume: 2016 Issue: 1 Handle: RePEc:oec:ecokac:5JG1G64G196G Template-type: ReDIF-Article 1.0 Author-Name: Gilbert Cette Author-Name: Rémy Lecat Author-Name: Carole Ly-Marin Title: Long-term growth and productivity projections in advanced countries Abstract: In this period of high uncertainty about future economic growth, we have developed a growth projection tool for 13 advanced countries and the euro area at the 2100 horizon. This high uncertainty is reflected in the debate on the possibility of a “secular stagnation”, fueled by the short-lived Information and Communication Technology (ICT) shock and the current low productivity and GDP growth in advanced countries. Our projection tool allows for the modelling of technology shocks, for different speeds of regulation and education convergence, with endogenous capital growth and TFP convergence processes. We illustrate the benefits of this tool through four growth scenarios, crossing the cases of a new technology shock or secular stagnation with those of regulation and education convergence or of absence of reforms. Over the period 2015-2100, the secular stagnation scenario assumes yearly TFP growth of 0.6% in the US, leading to a 1.5% GDP growth trend. The technology shock scenario assumes that the third technological revolution will, in the US, provide similar TFP gains to electricity during the second industrial revolution, leading to a 1.4% TFP trend, to which we add a TFP growth wave peaking in 2040, and thus to an average GDP growth rate of 3%. In non-US countries, GDP growth will depend on the implementation of regulation reforms, the increase in education and on the distance to the country-specific convergence target, namely the US, as well. Over the period 2015-2060, for the euro area, Japan and the United Kingdom, benefits from regulation and education convergence would amount to a 0.1 to 0.4 pp yearly growth rate depending on the initial degree both of rigidity and the TFP distance to the US. JEL classification: O11, O33, O43, O47, O57 Keywords: Growth, productivity, long-term projections, structural reforms, innovation, education                                               Journal: OECD Journal: Economic Studies Classification-JEL: O11; O33; O43; O47; O57 Year: 2017 Pages: 71-90 Volume: 2016 Issue: 1 Handle: RePEc:oec:ecokac:5JG1G6G5HWZS Template-type: ReDIF-Article 1.0 Author-Name: William C. Smith Author-Workplace-Name: RESULTS Educational Fund Title: National testing policies and educator based testing for accountability: The role of selection in student achievement Abstract: Increasingly accountability in education has linked student test scores to teacher and school evaluations. The underlying assumption behind this educator based accountability is that the high stakes linked to student test scores will prompt behavioral change, thus improving student learning and education quality. This study conducts a cross policy analysis using pooled data from the 2009 PISA, categorizing participant countries of the 2009 PISA into three national testing policies based on what type of educator based accountability is applied in the country. Results indicate that initial differences between national testing policy categories are not significant once school types and school practices that select on the student are included. This suggests that potential gains from more stringent accountability may be an artifact of schools under pressure engaging in practices that shape their testing pool, such as admitting only relatively high achieving students or transferring out lower achieving students. JEL classification: I21, I24, I25, I28 Keywords: Education, PISA, accountability, testing, equity                                                   Journal: OECD Journal: Economic Studies Classification-JEL: I21; I24; I25; I28 Year: 2017 Pages: 131-149 Volume: 2016 Issue: 1 Handle: RePEc:oec:ecokac:5JG1JXFTJ4R3 Template-type: ReDIF-Article 1.0 Author-Name: Christian Daude Author-Name: Julien Pascal Title: Efficiency and contestability in emerging market banking systems Abstract: This paper explores some of the potential determinants of efficiency and contestability in the banking systems of major emerging countries, using a sample of the 24 countries over the period 2004-13. Stochastic and data envelopment analyses are used to estimate national levels of efficiency, while market contestability is captured through the H-statistic. Panel data econometric methods are used to determine potential drivers of both efficiency and market contestability, which provides the basis for an evaluation of potential complementarities and trade-offs between these two dimensions. JEL classification: E44, G14, G21, G28, L11 Keywords: Banking, competition, efficiency, emerging markets                                                       Journal: OECD Journal: Economic Studies Classification-JEL: E44; G14; G21; G28; L11 Year: 2017 Pages: 151-182 Volume: 2016 Issue: 1 Handle: RePEc:oec:ecokac:5JG1JXFZDJ9V Template-type: ReDIF-Article 1.0 Author-Name: Balázs Égert Author-Name: Peter Gal Title: The quantification of structural reforms in OECD countries: A new framework Abstract: This document describes and discusses a new supply side framework that quantifies the impact of structural reforms on per capita income in OECD countries. It obtains the overall macroeconomic reform impacts by aggregating over the effects on physical capital, employment and productivity through a production function. On the basis of reforms defined as observed changes in policies, the paper finds that product market regulation has the largest overall single policy impact five years after the reforms. But the combined impact of all labour market policies is considerably larger than that of product market regulation. The paper also shows that policy impacts can differ at different horizons. The overall long-term effects on GDP per capita of policies transiting through capital deepening can be considerably larger than the 5- to 10-year impacts. By contrast, the long-term impact of policies coming only via the employment rate channel materialises at shorter horizon. Keywords: Structural reforms, simulation, per capita impact Journal: OECD Journal: Economic Studies Classification-JEL: D24; E17; E22; E24; J08 Year: 2017 Pages: 91-108 Volume: 2016 Issue: 1 Handle: RePEc:oec:ecokac:5JG1LQSPXTVK Template-type: ReDIF-Article 1.0 Author-Name: Mikkel Hermansen Author-Name: Oliver Röhn Title: Economic resilience: The usefulness of early warning indicators in OECD countries Abstract: The global financial crisis and the high associated costs have revived the academic and policy interest in “early warning indicators” of crises. This paper provides empirical evidence on the usefulness of a new set of vulnerability indicators, proposed in a companion paper (Röhn et al., 2015), in predicting severe recessions and crises in OECD countries. To evaluate the usefulness of the indicators the signalling approach is employed, which takes into account policy makers’ preferences between missing crises and false alarms. Our empirical evidence shows that the majority of indicators would have helped to predict severe recessions in OECD economies between 1970 and 2014. In the domestic areas, indicators that measure asset market imbalances (real house and equity prices, house price-to-income and house price-to-rent ratios), perform consistently well both in and out-ofsample. Domestic credit related variables appear particularly useful in signalling upcoming banking crises and in predicting the global financial crisis out-of-sample. Indicators of global risks consistently outperform domestic indicators in terms of their usefulness, highlighting the importance of taking international developments into account when assessing a country’s vulnerabilities. The good performance of the global indicators is however subject to a caveat: they are particularly suited to pick up recessions that affect a large number of countries simultaneously, such as the global financial crisis in 2008/09. The results are broadly robust to different definitions of costly events, different forecasting horizons and different time and country samples. JEL classification: E32; E44; E51; F47 Keywords: Resilience, early warning indicators, vulnerabilities, imbalances, severe recessions, crises                                                 Journal: OECD Journal: Economic Studies Classification-JEL: E32; E44; E51; F47 Year: 2017 Pages: 9-35 Volume: 2016 Issue: 1 Handle: RePEc:oec:ecokac:5JG2PPJRD6R3 Template-type: ReDIF-Article 1.0 Author-Name: David Bartolini Title: Administrative fragmentation and economic performance of OECD TL2 regions Abstract: The present work investigates the relationship between administrative fragmentation and regional per capita GDP growth rate, using a panel of OECD TL2 regions in the period 1996-2011. According to the fiscal decentralisation literature, fragmentation should enhance growth as local governments can implement policies that better match citizens’ needs, thus providing services and public goods in a more efficient way. The presence of many local governments, however, may result in overlapping functions, (dis)economies of scale, and uncoordinated policies. Keywords: Regional development, administrative fragmentation, local governments Journal: OECD Journal: Economic Studies Classification-JEL: R11; R50 Year: 2017 Pages: 109-129 Volume: 2016 Issue: 1 Handle: RePEc:oec:ecokac:5JG318W59M6H