1

The role of firms in wage inequality: Policy lessons from a large-scale cross-country study

By Chiara Criscuolo, Nathalie Scholl, Cyrille Schwellnus, OECD Directorate for Science, Technology and Innovation; Antton Haramboure, Alexander Hijzen, OECD Directorate for Employment, Labour and Social Affairs; and Michael Koelle, OECD Economics Department.

This post provides an overview of the new report The Role of Firms in Wage Inequality: Policy Lessons from a Large Scale Cross-Country Study launched on 9 December.

Policy makers in many OECD countries have been grappling for some time with a number of potentially inter-related trends: low productivity growth, widening gaps in business performance, increasing market concentration and rising income inequality (OECD, 2015; Andrews, Criscuolo and Gal, 2016; Berlingieri, G., P. Blanchenay and C. Criscuolo, 2017). However, little is known about the implications of widening gaps in business performance and increasing market concentration for wage inequality, including wage gaps between men and women.

Filling this knowledge gap is the aim of a new OECD report The Role of Firms in Wage Inequality: Policy Lessons from a Large Scale Cross-Country Study, OECD, 2021. As the pandemic has boosted the digitalisation of business models in a way that may favour large tech-savvy firms, this is a critical issue for policy makers seeking to support an inclusive recovery.

Firm pay policies account for around one-third of overall wage inequality

Wages are not only determined by workers’ skills but also by the productivity and pay policies of the firms they work for. The new report finds that average pay differentials across firms account for a sizeable part of overall wage inequality and that this predominantly reflects between-firm differences in pay for workers with similar levels of skills rather than differences in the composition of workers (Figure 1). Differences in wage premia across firms, i.e. pay differences after taking account of differences in workforce composition, account for around one-third of overall wage inequality.

Figure 1. Firm wage premia account for about one third of overall wage inequality

Contributions to overall wage dispersion, latest available year

Note: The height of the bars denotes the level of overall wage inequality in the latest available year, with the shaded parts denoting the contributions of firm premia, sorting and within-firm inequality. OECD refers to the average of the 20 countries shown.
Figures for the United States are based on Barth et al., 2016.
Source: OECD, 2021.

Between-firm pay gaps are not necessarily a bad thing, since they allow high-productivity firms to attract workers and grow their businesses by offering high wages.

But cross-firm pay gaps can also be excessive if they reflect barriers to mobility that trap a large share of workers in low-wage firms. This is particularly important for women who, on average, are more likely to work in low-wage firms.

For instance, a fast-food worker whose contract prevents her/him from moving to a higher-paying competing restaurant by a so-called non-compete clause remains trapped in her/his low-pay job, and prevents the high-pay restaurant from expanding. This raises wage inequality and reduces aggregate productivity.

Complementing worker-centred policies with firm-centred policies would promote an inclusive recovery

To promote an inclusive recovery from the COVID-19 crisis, policy makers need to update their toolkit and complement worker-centred policies with firm-centred policies. This involves:

  • First, enabling firms to adopt new technologies, digital business models and high-performance management practices would promote the productivity catch-up of low-performing firms and allow them to pay higher wages.
  • Second, ensuring effective competition between firms on both product and labour markets would limit the risk of excessive wage-setting power. This includes accounting for the labour market consequences of mergers and combating mobility-restricting agreements (e.g. non-compete clauses, some professional licencing requirements). According to the new report, strengthening competition between firms in local labour markets could significantly boost wages of workers in highly-concentrated markets who typically face a wage penalty of 7% relative to similar workers in markets with low concentration.
  • Third, boosting job mobility through active labour market policies (e.g. via re-skilling) and support for geographical mobility (e.g. via transport and housing policies) would allow workers currently trapped in low-performing firms to unlock their potential by moving to high-performing ones. The new report suggests that this could have significant effects on wages and inequality, as high-performing firms typically pay about twice as much as low-performing ones for comparable workers.
  • Fourth, promoting worker representation in the workplace and collective bargaining would further help counter-balance the disproportionate wage‑setting power of some employers, including large digital platforms that resort to non-standard forms of work (e.g. self-employed workers).

The new OECD report puts firms squarely at the centre of our thinking on the nexus between growth and inclusiveness by providing comprehensive new evidence on the links between firm performance, wage setting practices and wage inequality.

Action is needed now to avoid the risk of a two-speed economy in which activity and employment are highly concentrated, and high-productivity firms and their workers increasingly pull away from the rest.

References

Andrews, D., C. Criscuolo and P. Gal (2016), “The Best versus the Rest: The Global Productivity Slowdown, Divergence across Firms and the Role of Public Policy”, OECD Productivity Working Papers, No. 5, OECD Publishing, Paris, https://doi.org/10.1787/63629cc9-en.

Barth, E. et al. (2016), “It’s Where You Work: Increases in the Dispersion of Earnings across Establishments and Individuals in the United States”, Journal of Labor Economics, Vol. 34/S2, pp. S67-S97, http://dx.doi.org/10.1086/684045.

Berlingieri, G., P. Blanchenay and C. Criscuolo (2017), “The great divergence(s)”, OECD Science, Technology and Industry Policy Papers, No. 39, OECD Publishing, Paris, https://doi.org/10.1787/953f3853-en.

OECD (2021), The Role of Firms in Wage Inequality: Policy Lessons from a Large Scale Cross-Country Study, OECD Publishing, Paris, https://doi.org/10.1787/7d9b2208-en.

OECD (2015), In It Together: Why Less Inequality Benefits All, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264235120-en.




From hibernation to reallocation: loan guarantees and their implications for post-COVID-19 productivity

By Lilas Demmou and Guido Franco, OECD Economics Department

Many countries introduced or ramped-up guarantee schemes to bridge liquidity shortages as a key element of the policy response to the COVID-19 crisis. Governments raised the funding available for guarantee programmes (i.e. guaranteed loans more than doubled for the median OECD country), increased the level of the guarantee on credit, extended the coverage to a wider range of firms and simplified the administrative procedures to access the schemes.

Despite their relevance, empirical evidence on the role of loan guarantee programmes during the crisis in alleviating firm distress as well as their broader impact on productivity via reallocation is scarce. Our recent paper (Demmou and Franco, 2021) fills this gap by looking both at their potential short-term and medium-term effects.

Hibernation rather than zombification in the short-term, but reallocation may slow down in the medium-term

The crisis may have cleansing or scarring effects on productivity through the extensive margin. Depending on the type of firms “saved” over the productivity distribution, loan guarantees modify the market selection process and thereby aggregate productivity performance in the short-term. Based on i) a simulation model, ii) a large sample of SMEs located in 14 European countries, and iii) a detailed sector-specific shock to firms revenues, we show that loan guarantees played a critical role in bridging the large liquidity gaps associated to the COVID-19 shock and investigate the (pre-crisis) productivity profile of illiquid firms compared to that of the other firms in the sample.

Our findings show that the COVID-19 crisis had the potential to seriously hamper the efficiency of market selection mechanism by pushing many high productivity firms out of the market. As shown in Figure 1, Panel A, COVID-19 substantially raised the probability of financial difficulties across the whole distribution of firm-level productivity – the red line (COVID-19 absent policy support scenario) is constantly above the blue line (normal times). However, the combination of standard policies and loan guarantee schemes counter-acted this process by hibernating the corporate sector and re-aligning the market selection mechanism closer to normal time standards (orange line), especially for medium and high productivity firms (top 75% of the productivity distribution).

This desirable outcome is achieved at the cost of slightly “over-reducing” the probability of illiquidity of low productivity firms (bottom 25% of the productivity distribution). Yet, back-of-the-envelope simulations hint that only a small share of the firms turning liquid owing to loan guarantees could be classified as zombies (between 4% to 8%) and thus that zombie lending has potentially been limited during the first year of the pandemic.

At the same time, however, large loan guarantee programmes do not come without risks for future productivity. Exploring the historical relationship between the size of loan guarantee programmes and dynamic allocative efficiency in 10 OECD countries, we show that these schemes may favour the build-up of misallocation in the medium-term, as sizeable programmes are correlated with a slowdown in the ability of most productive firms to attract more labour and grow faster (Figure 1, Panel B).[1] For instance, while our results do not imply causation, a large increase in the loan guarantees to GDP ratio of 1 p.p.  appears associated with a decline in the efficiency of labour reallocation of one tenth.

Noteworthy, this average relationship masks relevant heterogeneities. The effects of loan guarantees on reallocation were found to be more benign in intangible-intensive sectors and even positive for smaller scale programmes, underscoring their potential to ease financial constraints and raising the prospect that delimited guaranteed credit programmes may help foster the growth of productive firms.

Figure 1. Credit guarantees have contributed decisively to repair COVID-19-induced inefficiency in market selection, but large programmes may hamper allocative efficiency in the medium-term

Note: Panel A shows the predicted probability to turn illiquid at different productivity levels in four different scenarios: No-COVID (blue line); COVID-19 without policy intervention (red line); COVID-19 with job retention schemes, debt moratorium and tax moratorium (green line); COVID-19 with loan guarantees in addition to the other policies (orange line). The shaded areas around the lines represent 95% confidence intervals. Productivity is measured as the log of pre-crisis firm-level multi-factor productivity. Based on an analysis covering the 2007-2018 period, Panel B shows the impact of an increase of the guaranteed loans to GDP ratio on the correlation between productivity and employment growth.
Source: OECD calculations based on Orbis® and OECD data.

Policy implications

At a glance, the empirical analysis shows that the cost of withdrawing support may outweigh the benefits in the short-term, while the reverse may hold when the economy will turn back to its pre-crisis levels. We argue that an effective exit strategy could aim at preserving the benefits achieved through support packages while reducing their drawbacks.

To reduce concerns of a potential collapse of credit flows following a premature withdrawal, policy makers could consider a gradual and state-contingent approach to phasing out loan guarantee schemes and other pandemic-related support:

  • Viable firms in hard-hit sectors and SMEs not directly benefitting from the international recovery may need continued liquidity support. Loan guarantee schemes could also be temporarily frozen once liquidity needs diminish, but specific arrangements to ease their reactivation could help to avoid cumbersome legislative processes or sunk operational costs if the scheme needs to be restarted later on.
  • Yet, to ensure that the additional support does not induce a material misallocation of resources over the medium-to-longer run, loan guarantee schemes may need to be fine-tuned and further targeted. For instance, re-designing the main covenants of the loans (e.g., portion of the loan backed by the government guarantee; fee to access the programmes) would diminish the risk of moral hazard and adverse selection.

The shock could still translate into a wave of corporate insolvencies and the reliance on credit guarantees could have increased firms indebtedness, leading to debt overhang. To countervail these risks, it is important to:

  • Privilege grants and quasi-equity type of instruments to support the corporate sector, e.g. linking loans repayment to businesses’ returns or converting government loans into grants (up to a ceiling and for specific operational costs).
  • Establish the conditions to promote early debt restructuring, e.g. through a reinforced network of consultations involving stakeholders or incentives for banks to restructure.

Finally, as pandemic-related support is phased-out, dynamism-enhancing structural reforms could be prioritised. In particular:

  • Boosting firms’ entry is a major challenge for absorbing displaced workers from upcoming bankruptcies, as it would allow harnessing the benefits of the creative-destruction process while reducing its social costs.
  • It is key to ensure the diffusion and uptake of digital technologies across all layers of the corporate sector, as digitalisation became a matter of survival for many firms in COVID-19 times, shaping not only productivity but also macroeconomic resilience.

Reference

Demmou, L. and G. Franco (2021), “From hibernation to reallocation: Loan guarantees and their implications for post-COVID-19 productivity”, OECD Economics Department Working Papers, No. 1687, OECD Publishing, Paris, https://doi.org/10.1787/2f4a4c20-en.


[1] It is worth stressing again that the analysis focuses on the productivity impacts via reallocation. Large programmes may also be performance enhancing through channels other than reallocation which are not investigated in this study – for instance by spurring within firm productivity, if loan guarantees provide additional resources (not available otherwise) that foster firms’ investment.




Mind the financing gap: Enhancing the contribution of intangible assets to productivity

By Lilas Demmou and Guido Franco

Intangible assets are at the heart of firms’ competitiveness, but their financing is complex for many firms.  Typically, intangible assets have unique characteristics – uncertain returns, non-rivalry, large synergies, low redeployability – that tend to increase information asymmetries and render them difficult to collateralise. Using sector and firm level data, our recent strand of work (Demmou et al., 2019; Demmou et al., 2020; Demmou and Franco, 2021) points to the existence of a financing gap impeding the full potential of intangibles from being harnessed, with negative implications for aggregate productivity growth and resilience (see also the companion Ecoscope blog).

Policies to close intangibles’ financing gap

The financial system has been historically designed to ease the accumulation of tangible capital and thus the global shift of our economies toward ideas-based growth reduces the ability of the financial sector to serve firms’ needs, generating new challenges for policy makers.

Given differences in the structure of financial systems across countries as well as in the most appropriate financing source for the various types of intangibles, the best-suited answer is not a one-size-fits-all approach. Accordingly, our recent paper (Demmou and Franco, 2021) discusses policy-levers that authorities could exploit to make each source of external finance available to firms — government support, equity financing and bank credit — more supportive of intangible investment (Figure 1).

The following set of policy measures is particularly relevant:

  • Financial market framework policies. Equity investors are more willing than banks to take risks even without strong collateral. Several actions could spur both the demand and supply of equity: progressing on the European Capital Market Union, reducing the preference to use debt over equity, easing access to IPOs, ensuring that the structure of equity markets is supportive of the provision of patient and engaged capital, and enhancing financial literacy.
  •  Standard innovation policies that would benefit investment in intangibles. The development of venture capital markets, which are an important source of finance for start-ups and intangible-intensive firms at early stages of their life-cycle, and a fine-tuning of government direct and indirect support of high growth SMEs could further ease the financing frictions faced by innovative firms.
  • Policies to widen financing options for investment in intangibles. Ensuring efficient liquidation of intangibles and providing incentives to bank credit backed by intangibles could increase their collateral value and ease access to bank finance. Better tailoring financial reports and accounting standards to the specific features of intangibles would enable both banks and equity investors to make better informed decisions when allocating resources. Moreover, the expansion of well-designed R&D tax incentives and government funding to other types of intangibles might also be considered for assets displaying positive externalities (e.g., organisational capital and workers’ training).
  • Intangible-friendly COVID-19 related support. The provision of loans and loan guarantees, the development of schemes featuring equity-type capital injections and the preservation of direct public support to innovative businesses could contribute to attenuate the disruptions caused by the COVID-19 outbreak and ease the even higher frictions that would hamper intangibles investment.

Figure 1. Policy options to ease intangibles financing

Source: OECD.

References

Demmou, L. and G. Franco, (2021), “Mind the financing gap: Enhancing the contribution of intangible assets to productivity”, OECD Economics Department Working Papers No. 1681. https://doi.org/10.1787/7aefd0d9-en

Demmou, L., G. Franco and I. Stefanescu, (2020), “Productivity and finance: The intangible assets channel – a firm level analysis”, OECD Economics Department Working Papers No. 1596. https://doi.org/10.1787/d13a21b0-en

Demmou, L., I. Stefanescu and A. Arquié, (2019), “Productivity growth and finance: The role of intangible assets – a sector level analysis”, OECD Economics Department Working Papers No. 1547. https://doi.org/10.1787/e26cae57-en




Mind the financing gap of intangible assets: hints on productivity and resilience

By Lilas Demmou and Guido Franco

Intangible assets are widely considered a major source of growth and resilience, also in view of their complementarity with digital technologies (Corrado et al., 2017). Yet, despite their aggregate rise in the past decades, productivity growth has been mediocre in most advanced economies. This raises questions about whether barriers to the financing of intangibles is preventing their growth potential from being fully exploited.

Typically, intangible assets have unique characteristics – uncertain returns, non-rivalry, large synergies, low redeployability – that tend to increase information asymmetries and render them difficult to collateralise. This makes their financing complex – particularly for young and small firms –and intangible investment often falls short of desired levels for a large portion of the corporate sector.

Our recent paper (Demmou and Franco, 2021) summarizes and extends recent OECD analyses exploring the extent to which financing barriers affect productivity and resilience outcomes in intangible-intensive sectors. It also proposes a cross-cutting set of financial market reforms to unlock the potential of intangible assets, which we discuss in a companion blog.

Intangible assets financing gap and productivity

Our results show that easing financing restrictions is particularly beneficial for productivity in sectors that rely more intensively on intangible assets (Demmou et al., 2019), indirectly confirming the existence of a “financing gap” due to financial frictions. This aggregate productivity impact operates via two channels:

  • The within firm channel operates via the ability of firms to finance their innovative projects. We show that the productivity of firms in intangible-intensive sectors benefits relatively more from sound financial conditions (Demmou et al., 2020): financing frictions explain 14% of the variation in productivity across firms in intangible-intensive sectors, against “only” 11% in traditional ones (Figure 1, Panel A).
  • The between-firm channel pertains to the reallocation of scarce resources to underpin the growth of productive firms. We provide evidence that the virtuous impact of financial development on labour reallocation across firms is larger in intangible-intensive sectors (Demmou and Franco, 2021): moving from a low to a high financial development level could increase the efficiency of labour reallocation – as proxied by the sensitivity of firm-level employment growth to lagged productivity – by 60% in intangible-intensive sectors and by 40% in traditional ones (Figure 1, Panel B).

Figure 1: A financing gap hindering productivity in intangible-intensive sectors

Note: Panel A shows the portion of the variation in productivity explained by moving from a high (75th percentile in the distribution of firms’ financial constraints) to a low (25th percentile) level of financial constraints. Panel B presents the marginal effect of productivity on employment growth at different levels of financial development in both high (dark blue line) and low (light blue line) intangible-intensive sectors.
Source: Demmou et al. (2020), Demmou and Franco (2021).

New challenges and opportunities related to the COVID-19 outbreak

The COVID-19 outbreak generates new opportunities to harness intangible assets potential, but also increases the challenges related to their financing.

Using a simple accounting simulation model, we show that intangible-intensive firms tend to be more resilient to shocks like the COVID-19 (Figure 2). We conjecture two main reasons for this finding. First, consistent with the diverse ability to rely on innovative technologies, firms operating in intangible-intensive sectors may find it easier to adapt to the new social distancing norms that are likely to prevail in the short to medium term and facilitate the reorganisation of supply chains that have been disrupted by the crisis. Second, intangible-intensive firms tend to rely prevalently on internal funds to finance investment and thus to hold larger cash and equity buffers. As a result, they have a lower probability of becoming distressed during the COVID-19 crisis.

Yet, the same factors at the heart of this resilience could become a source of difficulties during the recovery, slowing down intangible-investment in the aftermath of the crisis. As intangible-intensive firms are using their cash reserves to cover operating expenses during the crisis and find it difficult to access external finance, they may have to reduce critical investments until they buffer again enough financial resources. This process might take time given the reduced profit streams and uncertainty around future sales. A number of theoretical and empirical studies corroborate this narrative. For instance, when faced with financial constraints, firms cut their investment in R&D to reduce liquidity risks (Aghion et al., 2010) and, more broadly, invest less in intangibles (Garcia-Macia, 2017), especially if they are young and small (Brown et al., 2009; Hall and Lerner, 2010).

Figure 2: The impact of COVID-19 along the intangible intensity dimension

Note: Based on the accounting framework developed in Demmou et al. (2021), the figure shows the predicted impact of the COVID-19 outbreak one year after the implementation of the first confinement measures on both high and low intangible-intensive sectors. Panel A reports the percentage of otherwise viable firms experiencing losses, while Panel B the percentage of otherwise viable distressed firms (i.e., firms whose book value of equity is predicted to turn negative). The “optimistic” and “pessimistic” scenarios foresee a sharp drop in activity lasting two months, but then differ with respect to the speed of recovery in the post-confinement months.
Source: Demmou and Franco (2021).

References

Aghion, P., G. M. Angeletos, A. Banerjee and K. Manova, (2010), “Volatility and growth: Credit constraints and the composition of investment”, Journal of Monetary Economics, 57(3): 246–265. https://doi.org/10.1016/j.jmoneco.2010.02.005

Brown, J. R., S. M. Fazzari and B. C. Petersen, (2009), “Financing innovation and growth: cash flow, external equity, and the 1990s R&D boom”, Journal of Finance, 64(1): 151–185. https://doi.org/10.1111/j.1540-6261.2008.01431.x

Corrado, C., J. Haskel and C. Jona-Lasinio, (2017), “Knowledge spillovers, ICT and productivity growth”, Oxford Bulletin of Economics and Statistics, 79 (4): 592-618. https://doi.org/10.1111/obes.12171

Demmou L., S. Calligaris, G. Franco, D. Dlugosch, M. Adalet McGowan and S. Sakha, (2021), “Insolvency and debt overhang following the COVID-19 outbreak: Assessment of risks and policy responses”, OECD Economics Department Working Papers No. 1651. https://doi.org/10.1787/747a8226-en

Demmou, L. and G. Franco, (2021), “Mind the financing gap: Enhancing the contribution of intangible assets to productivity”, OECD Economics Department Working Papers No. 1681. https://doi.org/10.1787/7aefd0d9-en

Demmou, L., G. Franco and I. Stefanescu, (2020), “Productivity and finance: The intangible assets channel – a firm level analysis”, OECD Economics Department Working Papers No. 1596. https://doi.org/10.1787/d13a21b0-en

Demmou, L., I. Stefanescu and A. Arquié, (2019), “Productivity growth and finance: The role of intangible assets – a sector level analysis”, OECD Economics Department Working Papers No. 1547. https://doi.org/10.1787/e26cae57-en

Garcia-Macia, D., (2017), “The Financing of ideas and the Great Deviation”, IMF Working Paper No. 17/176. https://doi.org/10.5089/9781484311134.001

Hall, B. H. and J. Lerner, (2010), “The financing of R&D and innovation”, Handbook of the Economics of Innovation, 1: 609–639. https://doi.org/10.1016/S0169-7218(10)01014-2




COVID-19, Productivity and Reallocation: Hibernation, Not Zombification

By Dan Andrews, OECD Economics Department

The issue

The consequences of the pandemic for potential output will partly hinge on its impact on the reallocation of labour from low to high productivity firms. While Schumpeter proposed that recessions can accelerate this “cleansing” process, downturns can also distort reallocation dynamics if financial constraints result in the premature shakeout of productive but financially fragile firms. The pandemic could provide a further twist if job retention schemes delayed the restructuring of unproductive firms that would have otherwise contracted, thereby risking “zombification”. But timely evidence on this issue is scarce.

What we do

To fill this gap, two new OECD working papers explore how workforce adjustments (and exit) since early 2020 are connected to firm-level labour productivity, based on two high frequency firm-level datasets:

  • Xero – a cloud-based accounting software platform for small businesses – which supplies: i) data for Australia, New Zealand and the United Kingdom; ii) novel variables (e.g. hours worked and usage of E-commerce and cashflow reporting and management apps); and iii) analysis of reallocation and productivity before and after the onset of the pandemic.
  • Single Touch Payroll (STP) – which contains data on employment for most Australian firms since early 2020 – merged with Business Income Tax data from 2018/19. Crucially, this dataset contains flags on participation in JobKeeper (Australia’s job retention scheme).
What we find

Reallocation remained productivity-enhancing

Both papers show that while overall rate of job reallocation fell following the onset of the pandemic, a non-trivial share of firms were still adding or shedding workers, and this reallocation process remained connected to productivity. That is, the tendency for high productivity firms to expand and low productivity firms to contract – which propels medium-term productivity growth – remained intact.

Workforce adjustments remained connected to firm productivity, on both the heads and hours worked margins. This was especially the case in Australia, as reflected by a large gap in employment growth between firms in the top and bottom productivity quartiles (Figure).

Source: Andrews et al. (2021). Xero Small Business Insights

The pandemic also coincided with a temporary strengthening of the reallocation-productivity link in Australia and the United Kingdom over the first half of 2020, relative to 2019. But the reverse is true for New Zealand, which may partly reflect the earlier introduction of New Zealand’s job retention scheme, which also protected a greater share of workers than the JobKeeper scheme in Australia.

Firms that intensively used Apps to manage their business were more resilient, even after controlling for productivity. Thus, while policy partly thwarted creative destruction, the nature of the shock – i.e. one where being online and able to operate remotely were key – potentially favoured high productivity and tech-savvy firms, resulting in a reallocation of labour to such firms.

Job retention schemes played a nuanced role

That the reallocation-productivity link remained intact is surprising, given the large scale of Australia’s JobKeeper Scheme. JobKeeper provided broad-based crisis support from April to September 2020 (JobKeeper 1.0), but was then phased-out and firms had to re-apply for support (under JobKeeper 2.0).

Productivity-enhancing reallocation was actually stronger in those local labour markets that had a higher proportion of workforce in receipt of JobKeeper. This is consistent with the fact that JobKeeper 1.0 disproportionately shielded productive but financially fragile firms – a pivotal group who’s premature shakeout can impart scarring effects.

But the scheme grew more distortive over time, with JobKeeper 2.0 (from October 2020) more likely to support low productivity firms. In fact, there was virtually no productivity-enhancing labour reallocation in those local labour markets where the reach of JobKeeper 2.0 remained pervasive. By contrast, where a large amount of the workforce exited the scheme, more labour flowed towards high productivity firms.

What this means

The use of timely data to investigate the allocative effects of the pandemic is significant, given that the seminal paper on reallocation during the Great Recession arrived six years after Lehman Brothers collapsed (Foster et al., 2014). Yet, the pandemic may also shape productivity via other channels –digitalization, global knowledge spillovers and human capital – that will only become clear over time. 

This analysis suggests that job retention schemes can potentially protect workers from scarring without significantly distorting firm dynamics. While some initial concerns about zombification may have been overplayed, there is a fine line between such policies being supportive and distortive. This underscores the need for job retention schemes to be truly temporary and to evolve as economic conditions change.

References

Andrews, D., A. Charlton and A. Moore (2021), “COVID-19, Productivity and Reallocation: Timely evidence from three OECD countries”, OECD Economics Department Working Paper No. 1676. https://doi.org/10.1787/d2c4b89c-en.

Andrews, D., E. Bahar and J. Hambur (2021), “The COVID-19 shock and productivity-enhancing reallocation in Australia: Real-time evidence from Single Touch Payroll”, OECD Economics Department Working Paper No. 1677. https://doi.org/10.1787/2f6e7cb1-en

Foster, L., C. Grim and J. Haltiwanger (2014). “Reallocation in the Great Recession: Cleansing or Not?,” NBER Working Paper 20427.




Telework after COVID-19: survey evidence from managers and workers on implications for productivity and well-being

By Chiara Criscuolo, Peter Gal, Timo Leidecker, Francesco Losma and Giuseppe Nicoletti, OECD Global Forum on Productivity

In many ways, the pandemic has shown to be a watershed for the future of work. To respect social distancing measures many firms had to embrace intensive telework for the first time. The investments they made in IT equipment and online digital tools, the extensive experience gained by managers and workers with intensive telework and the ensuing breakdown of the stigma previously associated with telework may have indeed ushered in the permanently more widespread use of telework.

To assess the potential implications of this large-scale change, the OECD’s Global Forum on Productivity (GFP) launched an online survey together with Business at OECD (BIAC), the Trade Union Advisory Committee to the OECD (TUAC), the Energy Regulators Regional Association (ERRA), and supported by GFP Steering Group members. The survey inquired from managers and employees about their experience with and expectations about telework. Survey results from several thousand companies in 25 countries provided insights about how extensively telework may be relied on in the future, the anticipated advantages and downsides and what role public policies and managers can play in raising the gains from telework. The Key Highlights brochure that we released on our website for the 2021 Annual Conference of the Forum (oe.cd/gfp2021) provides a more exhaustive summary of the main results.

Telework is expected to remain widespread, but less intensively than during the pandemic

Survey results document that the share of workers doing telework once or more per week during the first wave of the pandemic roughly doubled across sectors compared to the pre-pandemic period (Figure 1 – Panel A). Even if this practice was new for many workers and had to be carried out in less than ideal conditions due to competing household and childcare duties, most managers and workers report telework had a positive impact on performance and well-being: the stigma has been broken. Accordingly, workers wish and managers expect telework to remain quite widespread after the pandemic (albeit less so than during the crisis). In a nutshell: telework seems here to stay.

Figure 1. Views from managers and workers about ideal telework post COVID-19

Source: Telework survey of the OECD Global Forum on Productivity.

In a previous policy note on the OECD COVID-19 hub, we argued that intermediate levels of telework are likely to be ideal for firm performance and employee well-being for most types of activities. Our survey results vindicate this hypothesis by showing that, according to both managers and workers, the largest share of regular teleworkers will likely work from home 2/3 days per week (Figure 1 – Panel B).

Telework is set to raise firm performance and well-being, but some challenges must be addressed

Why do managers and workers wish telework to be widespread in the future? Managers see the potential for better firm performance through telework because, in their opinion, workers work more intensively and more productively (due to the possibility for being more focused at home and for saving commuting time and effort). Moreover, this practice could generate opportunities for cost savings on reduced office space and better job matching from a geographically broader pool of talent. On the other hand, workers are keen to telework more because, among others, they can save money and time on commuting and they are more focused and relaxed at home (Figure 2).

Figure 2. Telework for higher productivity and enhanced well-being: killing two birds with one stone?

Source: Telework survey of the OECD Global Forum on Productivity.

However, just as there are two sides to every coin, this practice also entails important disadvantages that could hamper firm performance and well-being, especially in the long run. Managers are particularly worried about the longer-term impact of impaired communication among team members brought about by telework and the difficulties of training staff in a teleworking environment. In addition, they fear employees’ loyalty and team cohesion to be jeopardised when colleagues spend less time together in person. Focusing on the workers’ side, the fusing of private and work life, social isolation – which may become even more visible in the long run – and working from inappropriate spaces are the decisive drawbacks of telework.

To ensure the benefits dominate the drawbacks – and telework pays its double dividends by triggering better firm performance and higher worker satisfaction – it is pivotal to find innovative ways of promoting knowledge flows and training on both hard and soft skills within each firm and coordinate schedules among colleagues so that teams can get together in person on a regular basis.

To ensure gains from telework public policies should enable, empower and protect

In this context, public policies play a key role in ensuring that the advantages of this practice are not reaped solely by frontier firms and high-skilled workers. Firstly, public policies should enable access to telework for all by promoting investments in broadband access and childcare facilities – both in urban and rural areas. Secondly, they should empower workers and managers by supporting upskilling and training on both hard (notably ICT) and soft skills. Lastly, policies should protect workers from excessive telework by adapting the legal environment – with a special focus on health insurance coverage for remote work. Importantly, regulations should ensure this working arrangement remains a choice made jointly and in agreements by employers and employees. Dialogue among social partners will be crucial to achieving these goals.




Catching up to the frontier through the Human Side of Productivity: the role of skills and diversity

By Chiara Criscuolo, Giuseppe Nicoletti, Peter Gal and Timo Leidecker, OECD Global Forum on Productivity

Since the early 2000s productivity growth has been low in OECD countries. This overall weak performance hides large differences in performance between firms. In short, firms appear to differ in their ability to make use of the opportunities offered by ongoing structural changes related to digitalisation and globalisation; while some firms thrive, others struggle to keep up or even fall behind. For policy makers, it is therefore crucial to promote the adoption of best-practices at less productive firms to support their catch up to top performing firms, i.e. the productivity frontier.

For this, it is important to know what is different about the best performing firms. At its recent 2021 Annual Conference (oe.cd/gfp2021), the OECD Global Forum on Productivity published the Key Highlights of its work on the “Human Side of Productivity” to examine how the workforce composition contributes to performance (oe.cd/hsop). Drawing on a network of researchers and partners from national institutions, it analysed administrative linked employer-employee datasets covering detailed information on millions of firms and their employees across 10 countries, to examine how the characteristics of the people in the firm relate to productivity differences.

The most productive firms employ more high skilled workers, but medium skill levels are crucial in some countries and sectors

Differences in firm performance are closely related to differences in the use of skills. Top performing firms employ almost twice the share of high skilled employees compared to the least productive firms (Figure 1, panel A). However, country-specific patterns reveal that firms at the productivity frontier can pursue different skill strategies depending on national circumstances. For instance, while firms at the productivity frontier in France specialise in the intensive use of high skills, top productivity firms in Germany – with an established system for vocational training – also make intensive use of medium skills (Figure 1, panel B). From a sectoral perspective, it is mostly in the traditional, less knowledge intensive services – such as wholesale, retail, hotels, restaurants and transport – where medium skills are particularly widespread among the best performers.

Figure 1. The role of skills for productivity differences between firms

Source: Authors’ calculations based on cross-country micro-aggregated linked employer-employee data.

Moreover, despite the pervasive focus on high skills at the productivity frontier in all countries, employees at top performing firms also rely to an important extent on the full range of skills, including medium and low skills. Beyond general skills, we also highlight the systematic link of firm productivity with the use of specific skills, such as management and communication (soft skills) and ICT skills (hard skills).

Distinguishing managers and workers shows that manager skills can have a disproportionate impact on firm performance, due to their key position within the firm’s organisation. But high skilled managers and a highly skilled workforce are highly complementary; we find that high skilled managers are most effective with a highly skilled workforce. Reaping the full productivity gains associated with adjusting the firm’s skill structure – also taking into account manager-worker complementarities – corresponds to closing the productivity gap between the typical median performer firm and the frontier by 20%.

Adjusting the skill and managerial structure and raising diversity could reduce productivity gaps by one third

We also examined the role of firm organisation and cultural and gender diversity. Devoting more resources to formal management is linked to higher productivity, although the link is weaker in countries with traditionally flatter hierarchies (Denmark and Sweden). Our results also show that more gender and culturally diverse firms are more productive. Diversity especially benefits managers, who can gain the most from the more comprehensive perspective diversity offers for decision making and identifying business opportunities; drawing on a broader pool of diverse candidates for better job matching may also be especially important for managers. Most firms exhibit low levels of diversity, hence important productivity gains could be made from becoming more diverse, closing productivity gaps by about 10%.

Figure 2. Adjusting the Human Side can close productivity gaps by about one third

Source: Authors’ calculations based on cross-country micro-aggregated linked employer-employee data.

Adding up all these productivity gains, adjusting the workforce composition could close productivity gaps by about one third (Figure 2). These large gains show that people and the way they interact within the firm matter a lot for productivity. These gains are estimated to be larger than those coming from adjusting physical capital to that of the best performing firms (20%).

The Key Highlights also provide a map of public policy areas that could help firms adjusting the workforce. Promoting catch-up through the Human Side should build on a broad policy approach, also taking into account that such adjustments should be accompanied by further, complementary changes, e.g. to the firm’s organisation or investing in new technologies. Importantly, about half of the productivity gap is not yet accounted for in our analysis. Complementarities between people and tangible and intangible assets could go a long way to close this gap even further. Examining these complementarities will be the aim of the second stage of the project.




Occupational licensing – how much and what effects?

By Indre Bambalaite, Giuseppe Nicoletti, Christina von Rueden, OECD Economics Department

Occupational licensing – the legal authorisation from a national authority or a professional association to practice a specific occupation – is one of the fastest-growing labour market institutions since World War II (Kleiner and Krueger, 2010). It is not just lawyers, architects and engineers that have to comply with minimum human capital requirements, administrative burdens or mobility restrictions, in order to demonstrate professional aptitude and protect the public from unqualified, incompetent or unscrupulous providers. Offering skincare or hair removal services as a licensed cosmetologist in Pennsylvania, for instance, takes 1250 hours of training, a state exam and a blank criminal record, and to become a baker in France one needs to take a 7 hour long state exam (Institute of Justice, 2018; Von Rueden and Bambalaite, 2020). These occupational entry regulations (OER) often reduce both business dynamism and employment, and generate higher prices for customers. However, despite their ubiquity, evidence about the intensity, scope and effects of OER has so far been confined to selected countries and/or professions, thus impeding cross-country and cross-occupational comparability on a larger scale. Also, their potential effects on productivity growth have been ignored.

New cross-country measures call for a review of OER and the need for more regional integration

Using new data on OER, OECD economists (Von Rueden and Bambalaite, 2020) shed light on the scope and stringency of these regulations for a set of 18 OECD countries, India and South Africa – with Canada and the United States being covered at the province-level or state-level – in ten personal (aestheticians, bakers, butchers, driving instructors, electricians, hairdressers, painters, plumbers, taxi drivers, and nurses) and five professional services (accountants, architects, civil engineers, lawyers and real-estate agents). The results illustrate that even countries sharing the same public goals in terms of safety and consumer satisfaction, sometimes apply very different approaches in pursuing them (Figure 1). Looking at successful experiences abroad, countries can learn from each other about ways to achieve these goals with lighter occupational entry requirements. More strikingly, regulatory approaches vary a great deal even within federal countries such as the US or Canada or economic unions such as the EU (Figure 2). Despite a myriad of policy initiatives aimed at facilitating the movement of professionals across these areas, these findings suggest the need for further integration efforts at the federal and international level.

Ill-designed occupational entry regulations can curb productivity in services

While there is abundant evidence on the side effects of OER on the economy – via less firm entry, lower employment and higher prices (e.g. Athanassiou et al. 2015; Blair and Chung, 2018; Cahuc and Kramarz, 2004; Larsen et al., 2019; Kleiner et al., 2016; Kleiner, 2017; Kleiner and Soltas, 2019) – evidence on the effects of occupational entry regulations on firm-level and aggregate productivity growth is scant. Yet, by creating barriers to entry, OER might also unduly protect incumbents, stifle business dynamism and prevent the most productive firms from gaining market shares, weighing down on productivity growth in economies that are increasingly driven by entrepreneurial initiative and innovation. This concern arises especially at a time when governments are fiercely seeking ways to reverse the persistent productivity slowdown in advanced economies.

Looking at the effects of OER on the performance of firms that are subject to them, Bambalaite et al. (2020) highlight two channels through which productivity could be adversely affected. First, OER could lower firms’ incentives and capabilities to improve productivity by adopting best practices and hire the best professionals by curbing entry, competitive pressures and business dynamism. Estimations suggest that if those regulations were aligned on the least stringent ones, productivity could indeed increase by over 1.5 percentage points on average across occupations and firms, with the greatest gains accruing to high productive firms (Figure 3). Considering that the average productivity growth of the firms in the sample is less than half a percentage point per year, this increase would be significant. Second, OER can undermine the ability of the most productive firms to grow by limiting the supply of skilled professionals and their ability to move across firms within occupations, across occupations and across geographic jurisdictions (Johnson and Kleiner, 2020). In this regard, Bambalaite et al. (2020) estimate that in countries like Germany or Italy (where OER are the most stringent among the EU countries surveyed) easing occupational entry requirements to meet Swedish standards (which are the most lenient) could increase by over 10 percent the contribution of labour reallocation to employment growth in the personal and professional services covered in their analysis.

For
policy makers, the time to act is now

In light of the renewed evidence on the undesired economic consequences of ill-designed regulations, appropriate strategies for reforming occupational regulations are urgently warranted. While preserving their public policy aims, occupational entry regulations could be usefully reviewed by (1) making means more proportionate to ends (e.g. aligning on successful experiences abroad); (2) shifting the focus from inputs to outputs when the purpose of the regulation is to ensure that the outcome (such as a building standard or the quality of meat sold) rather than the service itself is of desired quality (e.g. via ex-post evaluation); (3) extending mutual recognition of entry requirements across jurisdictions (especially within federal countries and economic unions) and (4) eliminating mobility restrictions that create unnecessary labour market rigidities. Regulators should also consider whether licensing systems could be replaced with lighter alternatives, such as certification schemes, and where information asymmetry concerns persist, alleviate those through online consumer information platforms (e.g. leveraging on reliable service quality review systems).

See also: Rethinking occupational entry regulations on VoxEU

References:

Athanassiou, E., N. Kanellopoulos, R. Karagiannis and A.
Kotsi (2015), “The Effects of Liberalization of Professional Requirements in
Greece”, Centre for Planning and Economic
Research (KEPE)
, www.ec.europa.eu/DocsRoom/documents/13363/attachments/1/translations/en/renditions/native.

Bambalaite, I., G. Nicoletti and C. von Rueden (2020),
“Occupational entry regulations and their effects on productivity in services:
Measurement and firm-level evidence”, OECD Economics Department Working Papers,
No. 1605, OECD Publishing, Paris.

Blair, P. Q., and B. W. Chung (2018), “How much barrier to
entry is occupational licensing?”, NBER
Working Paper Series
, No. 25262, https://doi.org/10.3386/w25262

Cahuc, P. and F.
Kramarz (2004), “De la précarité à la mobilité: vers une sécurité sociale professionnelle.
La documentation française”, Ministère de l’économie, des finances et de
l’industrie, Ministère de l’emploi, du travail et de la cohésion sociale.

Institute of Justice (2018), “Pennsylvania Fresh Start: Law
Denies Woman Right to Work Because Of Irrelevant Crime Convictions”, available
at https://ij.org/report/the-continuing-burden-of-occupational-licensing-in-the-united-states/

Johnson, J. and M. M. Kleiner (2017), “Is Occupational
Licensing a Barrier to Interstate Migration?”, Federal Reserve Bank of Minneapolis, Staff report No. 561, https://doi.org/10.21034/sr.561.

Kleiner, M.M., A. Marier, K. W. Park, and C. Wing, (2016),
“Relaxing occupational licensing requirements: Analyzing wages and prices for a
medical service”, The Journal of Law and
Economics
, Vol. 59(2), pp.261-291, https://doi.org/10.1086/688093.

Kleiner, M. M. (2017), “The influence of occupational
licensing and regulation”, IZA World of
Labor
, No. 392, https://doi.org/10.15185/izawol.392.

Kleiner, M. M. and E. J. Soltas (2018), “A Welfare Analysis
of Occupational Licensing in U.S. States”, http://dx.doi.org/10.2139/ssrn.3140912.




América Latina: las perspectivas económicas repuntan levemente pero se requieren reformas para impulsar la productividad y disminuir desigualdades

Alvaro S. Pereira (Director) y mesas de países latinoamericanos, Departamento de Economía, Directorado de estudios de países, OCDE

Hace un año, la OCDE advirtió sobre el riesgo
que las incertidumbres comerciales y políticas dañen de manera significativa la
economía mundial y contribuyan aún más a la creciente división entre la gente.
Un año después, el impulso adquirido a nivel mundial se ha debilitado
notablemente. Se prevé que el crecimiento se mantendrá a un nivel inferior a
medida que persistan las tensiones comerciales. El comercio y la inversión se
han ralentizado considerablemente, especialmente en Europa y Asia. La confianza
empresarial y de los consumidores se ha debilitado, con la contracción de la
producción manufacturera. En respuesta, las condiciones financieras se han
relajado a medida que los Bancos Centrales han ido adoptando posturas
monetarias más expansivas, mientras que la política fiscal ha venido
proporcionando estímulo en ciertos países. Al mismo tiempo, el bajo nivel de
desempleo y el ligero aumento de los salarios en las principales economías
siguen fomentando los ingresos y el consumo de los hogares. Sin embargo, en
general, las tensiones comerciales están cobrando un precio y se prevé que el
crecimiento mundial se reduzca a sólo el 3,2% este año antes de acercarse al
3,4% en 2020, muy por debajo de las tasas de crecimiento observadas en las
últimas tres décadas, o incluso en 2017-2018.

En América Latina persisten diferencias significativas entre las
principales economías de la región. Las diferencias se deben tanto al diferente
impacto que tiene la desaceleración del crecimiento global como a factores de
índole local. Las economías con marcos fiscales y monetarios más robustos
continúan mostrándose más sólidas y resilientes, tanto frente a la
desaceleración global como respecto a episodios de volatilidad financiera. Mientras
que en Chile y Colombia el crecimiento se ha afianzado, México y Costa Rica han
crecido menos de lo esperado. De igual modo, Brasil ha mostrado menor ímpetu
mientras que Argentina se encuentra en recesión. Así, se espera que el
crecimiento en las seis principales economías de la región, que cubren
alrededor del 85% del PIB de América Latina, repunte leventemente este año y se
sitúe en torno al 1.4%, y alcance el 2.4 % en 2020 (promedio ponderado) (Tabla). 

Tabla. Perspectivas Económicas de la OCDE para algunos países de América Latina

Fuente: Perspectivas Económicas 105 de la OCDE.

Los indicadores de vulnerabilidad (como los déficits fiscales y de cuenta
corriente) se han acentuado en la mayoría de estas economías, indicando que la
región permanece vulnerable al contexto global. Es por ello que resulta vital
continuar reforzando los marcos de políticas macroeconómicas. Casi todas las
principales economías de la región están realizando esfuerzos de consolidación
fiscal. En este sentido, es importante alcanzar un equilibrio entre las
necesidades de gasto social e inversión pública y la necesidad de garantizar la
sostenibilidad de la deuda pública. En Chile, Colombia y México hay espacio
para que la reducción del déficit sea gradual, mientras que en Argentina,
Brasil y Costa Rica es necesario actuar más decididamente. Se han dado
recientemente pasos favorables en esta área, como la reciente reforma tributaria
aprobada en Costa Rica o el fortalecimiento del consejo fiscal independiente en
Chile. Pero hay aun mucha tarea por hacer, incluyendo reformas pensionales y
tributarias en varios países. Hay también margen para incrementar la eficiencia
del gasto público, mejorando su composición y focalizandolo hacia aquellas
partidas que ayuden a reducir las desigualdades y a promover la productividad.

En cuanto a la política monetaria, cambios recientes en la Reserva Federal
y el Banco Central Europeo, que mantendrán políticas monetarias expansivas por
más tiempo, han concedido más margen de maniobra a los bancos centrales de la
región. En general la inflación permanece cerca de los objetivos de los bancos
centrales, con la excepción de Argentina, donde la fuerte inercia inflacionaria
continua.

Las tasas de crecimiento que la región ha mostrado recientemente no han
sido suficientemente robustas para avanzar en el proceso de convergencia y
recortar la brecha con los estándares de vida de las economías desarrolladas
(Figura). El modesto repunte del crecimiento que se espera para 2019 y 2020 no
será suficientemente vigoroso para retomar la senda de convergencia. A eso se
añade que las tendencias demográficas implican que el llamado bono demográfico,
que ha venido sustentando el crecimiento de la región, está llegando a su fin.
Por ello, reformas que impulsen la productividad son fundamentales e
ineludibles para que la región alcance estándares de vida más elevados. Este es
un reto que comparten todos los países, y los esfuerzos para aumentar la
productividad deberían ayudar también a reducir los altos niveles de desigualdad
que aún presenta la región.

Figura. El crecimiento no está siendo suficientemente vigoroso para cerrar significativamente la brecha con las economías avanzadas.

Nota: PIB per cápita relativo al promedio de la OCDE en términos de dólares estadounidenses (USD) ajustados a la paridad del poder adquisitivo.

Fuente: Base de datos de Productividad de la OCDE.

En muchos de los países de la región existe mucho margen para promover un
mayor grado de competencia en los mercados de bienes y servicios, lo que
ayudaría a fortalecer la productividad y también redundaría en menores precios,
lo que potenciaría el poder de compra de las familias, en particular de
aquellas de renta más baja. Para ello sería necesario reducir la carga
regulatoria, simplificando los trámites y los sistemas de licencias. Asimismo,
favorecer una mayor integración con la economía mundial también incrementaría
la competencia en las economías locales y, además, ayudaría a diversificar las
canastas exportadoras y a reducir los déficits de cuenta corriente. Los
sistemas tributarios de la región ofrecen también mucho margen para favorecer más
decididamente la inversión y la productividad. Las prioridades varían en cada
país, e incluyen ampliar las bases imponibles reduciendo exenciones, dado que estas
tienden a favorecer a los individuos más afluentes. Hay en general margen pare
reducir exenciones tributarias tanto en los impuestos corporativos como en el IVA
o en los impuestos personales. También sería importante reducir la evasión
fiscal y hacer un mayor uso de impuestos a la propiedad o ambientales. Invertir
en capital humano, poniendo la calidad de los resultados educativos como
objetivo fundamental, es también un reto ineludible para la región. Cerrar las
brechas en infraestructura y logística y apostar decididamente por la digitalización
y la innovación deberían ser también prioridades. Para fomentar la
productividad y reducir desigualdades es también vital reducir la informalidad
y continuar facilitando la participación laboral de la mujer.  

Argentina: La economía irá recuperándose
paulatinamente de las turbulencias en el mercado financiero experimentadas en
2018. Una fuerte depreciación de la moneda ha acentuado aún más la elevada
inflación, lo que ha mermado los ingresos reales y la confianza de los
inversores. Las políticas macroeconómicas contractivas y la incertidumbre
política previa a las elecciones de octubre de 2019 pesarán en la recuperación de
la demanda interna. Sin embargo, la economía irá saliendo poco a poco de la
recesión gracias a las exportaciones, a las que ha favorecido una buena cosecha
y un tipo de cambio real más competitivo. Al mismo tiempo, el lento crecimiento
del comercio internacional limitará considerablemente la expansión de las
exportaciones. Según las proyecciones, el desempleo no retrocederá antes de
2020.

Brasil: La recuperación se ha ralentizado pese a
las favorables condiciones financieras, pero se espera que el crecimiento
repunte hasta el 2 ¼ % en 2020. Aunque se ha presentado ante el Congreso una
ambiciosa propuesta de reforma del sistema de pensiones para garantizar la
sostenibilidad fiscal, aún hay incertidumbre acerca de su implementación. A
medida que dicha incertidumbre se disipe, se prevé un aumento de la demanda
interna y un descenso del desempleo. Habida cuenta de la amplia capacidad
ociosa, se espera que la inflación se mantenga por debajo de la meta.

Chile: El crecimiento económico seguirá siendo
sólido, superior al 3%, en 2019-2020. La inversión se verá respaldada por las
favorables condiciones de financiamiento, los elevados precios del cobre, la
reforma tributaria y laboral previstas y el clima empresarial positivo. Bajas
tasas de interés reales y un fuerte crecimiento de los salarios contribuirán a
la solidez del consumo privado. La consolidación del crecimiento económico
comenzará a traducirse en un mayor aumento del empleo. Las desigualdades siguen
siendo altas, debido a una movilidad intergeneracional persistentemente baja.

Colombia: El crecimiento económico seguirá siendo
sólido, superior al 3%, en 2019-2020. La inversión se verá respaldada por las
favorables condiciones de financiamiento, los elevados precios del cobre, la
reforma tributaria y laboral previstas y el clima empresarial positivo. Bajas
tasas de interés reales y un fuerte crecimiento de los salarios contribuirán a
la solidez del consumo privado. La consolidación del crecimiento económico
comenzará a traducirse en un mayor aumento del empleo. Las desigualdades siguen
siendo altas, debido a una movilidad intergeneracional persistentemente baja.

Costa Rica: Se prevé que la actividad económica
repunte, respaldada por la inversión en infraestructuras y el aumento de la
confianza empresarial tras la aprobación de las reformas fiscales. El gasto de
los consumidores seguirá siendo moderado, por causa de incrementos de
impuestos, un menor crecimiento del crédito y un incremento temporal de la
inflación relacionado a la introducción del IVA. No obstante, la mejora de los
términos de intercambio incrementará los ingresos disponibles, y la demanda
externa mantendrá su solidez, gracias al turismo, los productos de alta
tecnología y los servicios a empresas.

México: La actividad económica experimentará un
modesto repunte, respaldada por la demanda interna. El consumo ganará fuerza
gracias a la solidez de las remesas, el descenso de la inflación y el aumento
de las transferencias sociales. Los anunciados planes de inversión en
infraestructuras también contribuirán al crecimiento, aunque las restricciones
del gasto corriente contrarrestarán parcialmente estos efectos. La incertidumbre
política seguirá conteniendo la inversión privada. El descenso de la actividad
petrolera continuará pesando sobre el crecimiento. De manera general el
crecimiento será demasiado moderado como para permitir que se reduzcan las
altas tasas de informalidad.

Para leer en más
detalle sobre las proyecciones macroeconómicas, así como los principales
desafíos estructurales ir al reporte en la versión español/portugués o inglés (que incluye proyecciones para todos los
países de la OECD, principales desafíos y un capítulo especial sobre
digitalización y el tipo de políticas que facilitarían que esta se traduzca en
un crecimiento más fuerte e inclusivo).




Are digital technologies the new Holy Grail ?

By Stéphane Sorbe, Peter Gal, Giuseppe Nicoletti and Christina Timiliotis

Digital innovations are everywhere, in our pockets, cars and homes. However, while digital technologies seem to offer great potential to enhance firm productivity, productivity growth has slowed sharply in most OECD countries over the past two decades (Figure 1).

Source: OECD Productivity Statistics

One explanation to this puzzle is that digital
technologies are spreading out across firms less rapidly than we think.
Moreover, digital adoption has not been equally effective across all types of
firms.

As more productive firms have tended to adopt
digital technologies faster and more efficiently, their performance has improved
relative to less-digitalised, less-productive firms, contributing to a widening
gap in productivity performance. This has far-reaching implications, as it
contributes to widening wage dispersion and income inequalities.

Recent
OECD work
focusing on EU countries suggests that
policies have a key role to play to enable efficient adoption of digital
technologies across firms, industries and countries, potentially yielding substantial
productivity gains and helping less productive firms to catch up.

A first paper (Andrews et al., 2018)
suggests that a set of structural and policy factors can affect firms’
capabilities and incentives to adopt a selection of digital technologies (e.g.
cloud computing, back and front-office integration software). These factors
include the availability of enabling infrastructures (such as high-speed
broadband internet), managerial quality and workers skills, and product,
labour and financial market settings that enable an efficient reallocation of
ressources across firms. Importantly, there are strong complementarities between
these factors.

A second paper (Gal et al., 2019) confirms that the adoption of digital technologies supports firm productivity. The benefits tend to be higher among more productive firms, presumably because they have more access to the technical and organisational skills that are crucial to adopt and use digital technologies efficiently. Indeed, the presence of skill shortages in an industry is found to reduce the benefits of digitalisation, mainly among the least productive firms. As a result, digitalisation may explain about half of the rising gap between best performing firms and the rest of firms observed over recent years.

The main findings of these two papers are combined and summarised in Sorbe et al. (2019). The analysis confirms that improving policies in a range of areas can support digital adoption and thereby substantially lift firm productivity (Figure 2). Thus, if widely adopted and well used, digital technologies could indeed help overcoming the headwinds that drive the global productivity slowdown.

Source: Sorbe et al. (2019)

While policies to make the best of digital technologies should be tailored to country specificities, the following priorities emerge across the OECD:

  • Implementing regulatory frameworks that support investment in
    broadband and pro-competition reforms in telecommunication sectors to enable
    broader and cheaper access to high-speed internet;
  • Increasing participation in training – especially of low-skilled
    workers – and its quality, as well as promoting good cognitive, organisational
    and managerial skills;
  • Enabling the efficient reallocation of labour and capital across
    firms and industries by reducing administrative burdens on start-ups,
    facilitating job transitions and improving the efficiency of insolvency
    regimes;

In addition to stimulating productivity, some of these policies can support inclusiveness to the extent that they help lagging firms to catch up, displaced workers to find other jobs and support wage growth. Upgrading skills is particularly important in this respect.

References:

Andrews, D., G. Nicoletti and C. Timiliotis (2018), “Digital
technology diffusion: A matter of capabilities, incentives or both?
”,
OECD Economics Department Working Papers, No. 1476, OECD Publishing, Paris

Gal, P., G. Nicoletti, T. Renault, S. Sorbe and C. Timiliotis (2019), “Digitalisation and productivity: In search of the holy grail – Firm-level empirical evidence from EU countries”, OECD Economics Department Working Papers, No. 1533, OECD Publishing, Paris.

Sorbe, S., P. Gal, G. Nicoletti and C. Timiliotis (2019), “Digital dividend: Policies to harness the productivity potential of digital technologies”, OECD Economic Policy Paper No. 26, OECD Publishing, Paris.