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Going for Growth: Shaping a vibrant recovery

by Laurence Boone, OECD Chief Economist and G20 Finance Deputy

A unique opportunity to shape a vibrant recovery

After a devastating 2020, prospects are improving. The rollout of vaccines is giving us hope while extraordinary monetary and fiscal buffers continue to support firms, jobs and incomes, limiting the social and economic fallout of the pandemic. Importantly, COVID-19 has exposed how structural weaknesses can weigh on economic resilience. How we respond will shape the recovery and the future of our economies. Governments need to act now to address the structural obstacles to growth, build resilience and sustainability; boost productivity and facilitate reallocation; and help people adapt to change.

The cost of unpreparedness to COVID-19 is counted in lives lost, livelihoods damaged and in long-lasting social and economic scars. Most healthcare systems struggled with a global outbreak on such an unprecedented scale. Social safety nets were unevenly prepared for dealing with the consequences of lockdowns. Jobs and incomes were lost with the most vulnerable people often the hardest hit. As large parts of economic, social and educational activity moved on-line, the opportunity costs of limited digital skills and insufficient infrastructure became real. Governments reacted with emergency measures, unprecedented in size and scope, to cushion the shock. Yet the measures will not fix the underlying structural problems, which left us vulnerable in the first place.

The crisis has only added to pre-existing challenges. Before the pandemic, many economies were struggling with sluggish productivity growth amid declining business dynamics. Structural problems in many labour markets included stubbornly high long-term unemployment, informality and poor job quality and security. Moreover, environmental sustainability alongside more general resilience concerns were often absent from growth strategies. As economies reopen in a world of rising digitalisation, changes to workplace practices, corporate restructuring and job transformation, reforms to enhance business dynamism and productivity growth also need to help people and firms adjust and reallocate in order to seize new opportunities.

Going for Growth 2021 provides first-hand advice to governments of OECD and major non-OECD economies on the structural policy priorities needed for a vibrant recovery. It is the OECD’s contribution to the debate on what governments need to do to break away from unsustainable past practices and achieve stronger, more resilient, more equitable and sustainable growth.

The pandemic has also underlined the importance of international cooperation, which can make policy action more effective and less costly. This is why, for the first time, we are putting forward priorities for international policy cooperation: in healthcare, on climate change, on global trade and on the taxation of multinational enterprises. By acting together can help to achieve more.

Laurence Boone
OECD Chief Economist and G20 Finance Deputy

Further reading:
OECD (2021), Economic Policy Reforms 2021: Going for Growth, OECD Publishing, Paris, https://doi.org/10.1787/3c796721-en.




Un’opportunità unica per dare forma a una ripresa vigorosa

Laurence Boone
OECD Chief Economist and G20 Finance Deputy

Dopo un 2020 devastante le prospettive stanno migliorando. Il lancio dei vaccini infonde speranza, mentre straordinari dispositivi fiscali e finanziari continuano a sostenere le imprese, i posti di lavoro e i redditi, limitando le ripercussioni sociali ed economiche della pandemia. È importante notare che il COVID-19 ha evidenziato come le debolezze strutturali possano pesare sulla resilienza economica. Il modo in cui risponderemo condizionerà la ripresa e il futuro delle nostre economie. I governi devono agire ora per affrontare gli ostacoli strutturali alla crescita, costruire la resilienza e la sostenibilità; stimolare la produttività e facilitare la riallocazione; e aiutare le persone ad adattarsi al cambiamento.

Il costo della mancata preparazione al COVID-19 si conta in vite umane, perdita di mezzi di sussistenza e cicatrici sociali ed economiche a lungo termine. La maggior parte dei sistemi sanitari ha lottato contro un’epidemia globale di una portata senza precedenti. Le reti di sicurezza sociale non erano tutte ugualmente preparate per affrontare le conseguenze dei lockdown. Sono stati persi posti di lavoro e redditi, e le persone più vulnerabili sono state spesso le più colpite. Se da un lato gran parte dell’attività economica, sociale ed educativa veniva effettuata online, dall’altro i costi in termini di opportunità dovuti alle scarse competenze digitali e all’insufficienza delle infrastrutture si sono fatti evidenti. I governi hanno reagito adottando misure di emergenza, senza precedenti per dimensioni e portata, per mitigare gli effetti della crisi innescata dalla pandemia. Ma tali misure non permetteranno di risolvere i problemi strutturali sottostanti che ci hanno reso vulnerabili.

La crisi non ha fatto altro che accentuare i problemi già esistenti. Prima della pandemia, molte economie lottavano contro una crescita lenta della produttività in un contesto di declino delle dinamiche aziendali. I problemi strutturali in molti mercati del lavoro includevano una disoccupazione a lungo termine ostinatamente alta, l’informalità e la scarsa qualità e sicurezza del lavoro. Inoltre, la sostenibilità ambientale insieme a preoccupazioni più generali di resilienza erano spesso assenti dalle strategie di crescita. In un momento in cui le economie si rimettono in moto in un mondo caratterizzato da una crescente digitalizzazione, cambiamenti nelle pratiche di lavoro, ristrutturazione aziendale e trasformazione dei posti di lavoro, le riforme per migliorare il dinamismo delle imprese e la crescita della produttività devono anche aiutare le persone e le imprese ad adattarsi e a riqualificarsi per cogliere le nuove opportunità.

Going for Growth 2021 fornisce indicazioni concrete ai governi dei Paesi dell’OCSE e delle principali economie non OCSE sulle priorità di politica strutturale necessarie per favorire una ripresa vigorosa. Rappresenta il contributo dell’OCSE al dibattito sulle azioni che i governi devono intraprendere per non perpetuare le pratiche insostenibili del passato e raggiungere una crescita più forte, più resiliente, più equa e sostenibile.

La pandemia ha anche sottolineato quanto sia importante la cooperazione internazionale affinché l’azione politica sia più efficace e meno costosa. Ecco perché, per la prima volta, stiamo proponendo alcune priorità per la cooperazione politica internazionale in termini di assistenza sanitaria, cambiamento climatico, commercio globale e sulla tassazione delle imprese multinazionali. Agendo insieme potremo raggiungere risultati più grandi.

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Une occasion unique de bâtir une reprise dynamique

par Laurence Boone
Cheffe économiste de l’OCDE et Représentante de l’OCDE au G20 pour les affaires financières

Après une année 2020 dévastatrice, les perspectives s’éclaircissent. La dynamique vaccinale nous donne de l’espoir tandis que les mesures monétaires et budgétaires exceptionnelles continuent de soutenir les entreprises, les emplois et les revenus, limitant les retombées sociales et économiques de la pandémie. Fait important, la crise liée au COVID-19 a mis en évidence les mécanismes par lesquels les faiblesses structurelles peuvent saper la résilience de nos économies. Les mesures que nous prenons seront déterminantes pour la reprise et l’avenir de nos économies. Les gouvernements doivent agir dès à présent pour lever les obstacles structurels à la croissance; développer la résilience et la durabilité; stimuler la productivité et faciliter la réaffectation des ressources; et aider les individus à s’adapter au changement.

Le coût de l’impréparation à la crise du COVID-19 s’est soldé par des pertes en vies humaines, une dégradation des moyens de subsistance et des séquelles sociales et économiques durables. La plupart des systèmes de santé ont dû affronter une vague épidémique mondiale d’une ampleur inédite. Selon les économies, les filets de protection sociale étaient plus ou moins prêts à faire face aux conséquences des périodes de confinement. Les pertes d’emplois et de revenus qui ont suivi ont souvent touché le plus durement les individus les plus vulnérables. De larges pans de l’activité économique, sociale et éducative ayant basculé en ligne, les coûts d’opportunité des compétences numériques limitées et des infrastructures insuffisantes se sont matérialisés. Pour amortir le choc, les gouvernements ont réagi en prenant des mesures d’urgence d’une taille et d’une ampleur inédites. Pourtant, ces mesures ne règleront pas les problèmes structurels sous-jacents qui sont en fait à l’origine de notre vulnérabilité.

La crise n’a fait que s’ajouter aux difficultés préexistantes. Avant la pandémie, nombre d’économies étaient confrontées à une faible croissance de la productivité dans un contexte de dynamique des entreprises en déclin. Le chômage de longue durée, l’économie informelle ainsi que la qualité et la sécurité médiocres des emplois étaient autant de problèmes caractérisant beaucoup de marchés du travail. De plus, la durabilité environnementale et les préoccupations plus générales relatives à la résilience étaient souvent absentes des stratégies en faveur de la croissance. Avec la réouverture des économies dans un monde défini par une montée en puissance du numérique, une évolution des environnements de travail, des restructurations d’entreprise et une transformation de l’emploi, les réformes visant à améliorer la dynamique des affaires et la croissance de la productivité doivent également aider les individus et les entreprises à s’adapter et à réaffecter leurs ressources afin de saisir les nouvelles chances qui s’offrent à eux.

La publication Objectif croissance 2021 contient des conseils de première main à l’intention des gouvernements des économies de l’OCDE et des grandes économies non membres concernant les priorités des politiques structurelles à mener pour parvenir à une reprise dynamique. Elle constitue la contribution de l’OCDE au débat portant sur les mesures que les gouvernements doivent prendre pour rompre avec les pratiques non viables du passé et faire advenir une croissance plus forte, plus résiliente, plus équitable et plus durable.

La pandémie a également mis en évidence l’importance de la coopération internationale, gage d’une action publique plus efficace et moins coûteuse. C’est la raison pour laquelle nous mettons en avant, pour la première fois, les priorités de la coopération internationale dans les domaines de la santé, du changement climatique, des échanges internationaux et de la fiscalité des entreprises multinationales. C’est seulement ensemble que nous irons plus loin.

A lire:
Objectif Croissance 2021: Pour une reprise dynamique




The G20’s Enhanced Structural Reform Agenda: Real progress but not good enough

by Tomasz Kozluk, Nicolas Ruiz, Agnes Cavaciuti, Dorothée Rouzet, Oliver Röhn, Lukas Lehner, and Colombe Ladreit de Lacharrière, Aida Caldera Sánchez and Asa Johansson

The global economy is fragile. In the OECD’s November Economic Outlook global growth is projected to have slowed to 2.9% in 2019 and barely reach 3% in 2020. Persistent trade conflicts and high uncertainties are undermining confidence, trade and investment. The consequences can be long-lasting, with a real risk of the global economy being locked into a long period of structurally low growth. As a result, it will be more difficult to deliver broad gains in productivity, wages and living standards making people’s lives better, for all.

The global economic slowdown comes on top of increasing pressures from global “mega-trends”. Globalisation, digitalisation, population ageing and environmental degradation are shaping tomorrow’s living standards and well-being. Inequality and poverty remain major concerns, both in advanced and emerging-market G20 economies. In the absence of renewed reform dynamism, economies are poorly prepared to tackle these challenges.

In a push to address these challenges, under the Chinese Presidency in 2016 G20 leaders agreed to an Enhanced Structural Reform Agenda. This agenda comprised G20 priority areas and guiding principles for structural reform, and a set of quantitative indicators to track the evolution of policy settings and outcomes. The OECD was tasked to assess progress and has just published its second report under the G20’s Enhanced Structural Reform Agenda to Ministers and Governors (ESRA). The ESRA report provides an overview of collective G20 progress and structural policy achievements, as well as individual notes assessing progress for each G20 member country since 2017.

The report shows that the G20 has made real progress in a number of areas, but more efforts are warranted to put G20 economies on a path of rising living standards and opportunities for all. Significant examples include reforms to lift employment and make labour markets more inclusive (e.g. France or Japan). Regulatory simplification and tax policy have also been used to support firms’ investment and growth in some countries (e.g. China, India, United States). These reforms mark significant progress, but there is still work to do. GDP per capita in G20 countries, both advanced and emerging, is on a lower growth path than prior to the global financial crisis. This reflects not only less favourable demographic trends but also the consequences of the past decade of sub-par investment and productivity growth. In the longer term, higher productivity growth will be crucial to ensure strong and sustainable increases in living standards.

While poverty and inequality have fallen in the past decade in many emerging economies, such as Brazil and Indonesia, disposable income inequality remains high. In many advanced economies, lower-income households benefitted little from economic growth in the years following the global financial crisis, raising concerns that many are not sharing in the gains from growth. Some progress has been made on environmental sustainability, but G20 countries have yet to act in order to achieve the long-term objectives set out in the Paris Agreement.

Faced with these pressing challenges, G20 governments must take action to steer their economies towards stronger, more inclusive and sustainable growth. The specific structural reform priorities under the G20’s Enhanced Structural Reform Agenda differ across countries, but each G20 country can pursue more ambitious policy packages to boost productivity and inclusiveness together. By identifying the areas where progress is needed, this report helps countries to develop and deliver ambitious agendas.

References

OECD (2019), “OECD Technical Report on Progress on Structural Reform under the G20 Enhanced Structural Reform Agenda”, OECD Publishing, Paris, oe.cd/esra-G20

OECD (2019), OECD Economic Outlook, Volume 2019, Issue 2, OECD Publishing, Paris, https://doi.org/10.1787/9b89401b-en. .

OECD (2019), Economic Policy Reforms 2019: Going for Growth, OECD Publishing, Paris, https://doi.org/10.1787/aec5b059-en.

OECD (2017), “ OECD
Technical report on “Progress on Structural Reform Under the G20 ESRA
”,
OECD Publishing, Paris, April.




Des réformes doivent être engagées maintenant pour s’adapter aux évolutions du monde

par Laurence Boone, Cheffe économiste de l’OCDE 

Des réformes doivent être engagées maintenant pour s’adapter aux évolutions du monde La mondialisation, la transition numérique, le vieillissement démographique et la dégradation de l’environnement sont autant de mégatendances qui déterminent ce que seront, demain, les niveaux de vie et le bien-être. Or, en l’absence d’une reprise de la dynamique des réformes, les perspectives s’annoncent moroses. L’économie mondiale risque de voir à nouveau souffler des vents contraires, avec une croissance qui va fléchir sur fond d’incertitudes commerciales fortes. Parallèlement, les gains de niveaux de vie tels que mesurés par le PIB par habitant n’ont pas encore retrouvé leur niveau d’avant la Grande crise financière. Tous ces facteurs devraient inciter les responsables de l’action publique à engager les réformes nécessaires pour instaurer une croissance plus vigoureuse, plus inclusive et écologiquement durable, et permettre à tous les citoyens de tirer le meilleur parti des perspectives offertes par ce nouvel environnement.

L’édition 2019 d’Objectif croissance présente, à l’intention des décideurs publics de chaque pays, un ensemble de priorités de réformes nationales spécifiques qui doit permettre de se préparer aux évolutions futures et de transformer les défis liés aux mégatendances en chances pour tous.

Les gouvernements s’emploient de plus en plus à relever les défis sociétaux et cela commence à porter ses fruits

Si l’on examine les résultats des réformes obtenus au cours des deux dernières années, on aboutit à un bilan mitigé. Le rythme global des réformes est retombé à son modeste niveau d’avant la crise, mais plusieurs pays ont tout de même réussi à mettre en oeuvre des réformes majeures, répondant directement à des priorités énoncées dans des éditions passées d’Objectif croissance.

On peut citer comme exemples des réformes visant à stimuler l’emploi et à rendre le marché du travail plus inclusif. La France a ainsi amélioré les négociations collectives et la sécurité juridique des licenciements, réformé les règles de l’assurance-chômage et renforcé les prestations liées à l’exercice d’un emploi. Le Japon de son côté a pris des mesures pour améliorer l’offre de services d’accueil de jeunes enfants et adopté de nouvelles lois sur les heures supplémentaires afin d’améliorer l’équilibre vie professionnelle-vie privée.

Des actions de simplification de la réglementation et des mesures relevant de la politique fiscale ont été également mobilisées pour soutenir l’investissement et la croissance des entreprises, mais aussi pour donner aux pouvoirs publics les ressources nécessaires à la redistribution. Ainsi, les États-Unis ont abaissé le taux de l’impôt sur les bénéfices des sociétés et réformé la fiscalité des entreprises, mesures qui font partie depuis longtemps des priorités formulées dans Objectif croissance. L’Inde a procédé à une réforme fiscale qui fera date avec l’introduction d’une taxe sur les biens et services. D’autres pays, comme l’Espagne, la Grèce et la Pologne, ont pris d’importantes mesures pour améliorer le recouvrement de l’impôt. Plusieurs pays ont fait en sorte de faciliter l’entrée sur les marchés et d’offrir des règles du jeu équitables aux entreprises en réduisant les lourdeurs administratives, en déréglementant les services professionnels et les secteurs de réseaux ainsi qu’en renforçant les pouvoirs des autorités de la concurrence.

Les gouvernements ont également intensifié leurs efforts de réforme pour relever les défis sociaux. La Grèce et l’Italie ont adopté des plans nationaux de lutte contre la pauvreté. En Inde, le raccordement de tous les villages à l’électricité a été achevé et le pays a mis en place un régime national de protection santé ciblant 100 millions de familles pauvres. La Chine a obtenu des avancées dans la réduction de la fracture entre les zones rurales et les zones urbaines qui caractérisait son système de santé en améliorant la portabilité de l’assurance maladie.

Toutes ces réformes ont déjà pour effet d’améliorer la vie de millions de personnes. Pourtant, il reste encore à faire, et Objectif croissance se fait l’écho de l’expertise des spécialistes de l’OCDE quant aux domaines sur lesquels les responsables de l’action publique devraient concentrer leur action de réforme afin d’offrir aux générations futures une croissance durable et inclusive.

Il faut faire davantage, notamment en matière de réformes susceptibles de déboucher sur des résultats plus forts et plus justes

Les priorités de réforme destinées à promouvoir une croissance inclusive diffèrent d’un pays à l’autre. De fait, l’éducation est la priorité de réforme la plus largement partagée, et elle est indispensable pour garantir un emploi aux générations actuelles et futures, de façon à stimuler la productivité et à donner à chacun les meilleures chances de mener une vie épanouissante. Un grand nombre de recommandations relevant du domaine de l’éducation mettent l’accent sur un meilleur ciblage des ressources en direction des élèves et des établissements défavorisés ; c’est le cas dans de nombreux pays d’Europe et d’Amérique latine, mais aussi aux États-Unis. Pour des économies de marché émergentes comme l’Inde ou l’Afrique du Sud, il est recommandé de moderniser les infrastructures scolaires.

La croissance et l’égalité des chances pourront aussi bénéficier de mesures visant à remédier au cloisonnement du marché du travail ainsi qu’à améliorer l’intégration des femmes, des migrants, des minorités et des travailleurs seniors sur le marché du travail, autant de mesures qui constituent un autre ensemble de priorités d’Objectif croissance, en particulier en Europe, mais aussi aux États-Unis, au Japon et dans plusieurs économies de marché émergentes.

Des réformes fiscales visant à donner plus de poids à la fiscalité du patrimoine constituent une priorité à l’appui de la croissance dans de nombreux pays, notamment des économies avancées. Faire en sorte d’améliorer l’efficience du secteur public, de renforcer l’état de droit et d’offrir des infrastructures appropriées et accessibles sont des mesures qui comptent pour économiser les ressources, ouvrir l’accès aux marchés et créer des conditions favorables aux entreprises et à l’innovation, en particulier dans les économies de marché émergentes, mais pas seulement.

Les réformes des marchés de produits constituent un domaine où les pays ont tendance à prendre du retard. De fait, ces réformes sont souvent délicates et leur mise en oeuvre parcellaire, mais l’ouverture des marchés à l’entrée, à la concurrence ainsi qu’aux échanges et investissements étrangers est essentielle pour favoriser l’innovation, la diffusion des technologies numériques et, au final, les gains de productivité et l’inclusion sociale. Des réformes de ce type restent parmi les fréquemment préconisées dans Objectif croissance.

Objectif croissance contient des orientations à l’intention des responsables de l’action publique sur les domaines où ils peuvent concentrer leurs efforts de réforme pour assurer le bien-être de leurs concitoyens et pour asseoir une croissance forte, durable, équilibrée et inclusive. Cela étant, certaines des priorités énoncées relèvent d’un effort coordonné de l’ensemble des pays, notamment en ce qui concerne l’ouverture aux échanges, les droits de propriété intellectuelle, la fiscalité des entreprises multinationales, le changement climatique, la sauvegarde des océans ou encore le traitement des déchets. En tant que telles, elles viennent utilement nous rappeler les avantages de la coopération multilatérale.

La croissance doit être écologiquement durable

Répondant à l’urgence climatique et en écho à l’Accord de Paris, la présente édition d’Objectif croissance aborde pour la première fois les problématiques sous l’angle de la viabilité environnementale. Partout dans le monde, les tensions sur l’environnement s’intensifient, et constituent une menace pour la soutenabilité des gains de croissance et de bien-être. Aucune stratégie de croissance durable ne saurait se concevoir sans des mesures de lutte contre la pollution de l’air, le changement climatique et d’autres grands problèmes environnementaux. En conséquence, la plupart des pays, y compris les plus grands pollueurs de la planète, se sont vu attribuer des priorités et recommandations de réforme qui visent à la fois les freins mis à la croissance et les goulets d’étranglement environnementaux.

Ces réformes doivent être engagées maintenant, pour assurer une vie meilleure aux citoyens d’aujourd’hui et aux générations futures.






The time for reform is now to respond to global challenges

by Laurence Boone, OECD Chief Economist

Globalisation, digitalisation, ageing and environmental degradation are the megatrends shaping tomorrow’s living standards and well-being. The prospects look weak in the absence of renewed reform dynamism. The global economy is facing further headwinds, with growth weakening in the wake of high trade uncertainty. At the same time, gains in living standards, as measured by GDP per capita, have been much slower since the Great Financial Crisis. All this should prompt policy makers to implement necessary reforms to deliver on stronger, more inclusive and environmentally-sustainable growth and help people make the most out of opportunities created in this new world.

This 2019 Going for Growth edition offers policy makers a set of country-specific reform priorities to prepare for the future and turn mega-trend challenges into opportunities, for all.

Governments are
increasingly addressing social challenges and reforms are paying off

Looking back at reform achievements over the past two years gives a contrasted picture. Although the overall pace of reforms has returned to the modest pre-crisis pace, a number of countries have managed to implement major reforms – reforms that respond directly to past Going for Growth priorities.

Significant examples include reforms to lift employment and make the labour market more inclusive. France improved collective wage bargaining and legal certainty for dismissals, reformed the rules for unemployment insurance and increased in-work benefits. Japan took steps to improve childcare provision and new laws on overtime work to improve work-life balance.

Regulatory simplification and tax policy have also been used to support firms’ investment and growth, but also provide governments with necessary resources for redistribution. The United States has cut corporate income tax rates and reformed business taxation – a long-standing Going for Growth priority. India implemented a landmark tax reform with the introduction of its Goods and Services Tax. Other countries, such as Greece, Poland and Spain took significant measures to improve tax collection. Several countries took measures to facilitate firm entry and level the playing field for businesses by reducing red tape, deregulating professional services and network sectors as well as by reinforcing competition authorities.

Governments have also intensified reform efforts to tackle social challenges. Greece and Italy rolled-out nationwide anti-poverty schemes. India finalised the connection of all its villages to electricity and launched a national health protection scheme targeting 100 million poor families. China made progress on bridging the rural-urban divide in its health care system by increasing the portability of health insurance.

These reforms are already improving the lives of millions. Yet,
there is more to do, and Going for Growth
reflects OECD’s expert judgement on where policy makers need to focus reform
actions to deliver sustainable and inclusive growth for future generations.

More needs to be done, especially on reforms that ensure stronger and fairer outcomes

The reform priorities to boost inclusive growth differ across countries. Education is the most common reform priority and is crucial to make sure current and future generations find employment, which would both boost productivity and give everyone the best chance for a fulfilling life. A significant number of recommendations in the area of education focus on improving the targeting of resources to disadvantaged students and schools, for example in many European and Latin American countries, as well as the United States. Upgrading school infrastructure is a recommendation in emerging-market economies such as India and South Africa.

Both growth and equal opportunities will also benefit from addressing labour market segmentation and improving the labour market inclusion of women, migrants, minorities and older workers – another set of top Going for Growth priorities, in particular in Europe, but also in the United States, Japan and several emerging-market economies..

Tax reform, with increasing reliance on property taxation, is a
pro-growth priority in many, particularly advanced economies. Better public
sector efficiency, rule of law and adequate, accessible infrastructure
provision are equally important to save resources, access markets and create
conditions for businesses to invest in innovation, in particular, but not only
in emerging-market economies.

Where countries have tended to lag behind is product market
reforms. Reforms are often difficult and granular in implementation, but opening
up markets to entry, competition and foreign trade and investment are essential
for innovation, the diffusion of digital technologies and ultimately
productivity growth and social inclusion.
Such reforms remain among the most frequent Going
for Growth
priorities.

Going for Growth guides policy makers where to focus their reform efforts for the well-being of their citizens and to achieve strong, sustainable, balanced and inclusive growth. However, some priorities require a co-ordinated effort by all countries. Examples include trade openness, intellectual property rights, taxation of multinational enterprises, migration, climate change, oceans and waste. As such, they are a useful reminder of the benefits of multilateral co-operation.

Growth has to be
environmentally sustainable

Responding to the urgency of climate change and to the Paris agreement, this edition of Going for Growth includes an environment sustainability angle for the first time. Around the world, environmental pressures are mounting, posing a threat to the sustainability of gains in growth and well-being. Tackling air pollution, climate change and other key environmental problems have to be part of a sustainable growth strategy. As a result, most countries, including key global polluters, have reform priorities and recommendations that address both growth and environmental bottlenecks.

The time for reform is now, for better lives today and for future generations!


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Income redistribution across OECD countries: main findings and policy implications

By Orsetta Causa, OECD Economics Directorate, and Anna Vindics and James Browne, OECD Directorate for Employment, Labour and Social Affairs

Income inequality has increased in most OECD countries over the past two decades. This is both because market incomes (wages, dividends, interest income) have become more unequally distributed, and also because redistribution through taxes and transfers has fallen. New OECD work explores cross-country evidence on trends in income redistribution since the mid-1990s to shed some light on the main drivers of the general decline.

New evidence on redistribution and its policy drivers

One finding is that the decline in redistribution was primarily explained
by a fall in cash transfers, which in
the majority of OECD countries account for the bulk of redistribution (Causa
and Hermansen, 2017). In turn, the decline in cash transfers was largely driven
by a fall in insurance transfers
(e.g. unemployment insurance, work-related sickness and disability benefits). In
some countries, this was partly mitigated by an increase in assistance transfers (e.g. minimum
income transfers, means- or income-tested social safety net). Personal income taxes also contributed,
but played a less important and more heterogeneous role.

To shed light on the underlying drivers, further investigation has
been conducted on the basis of both micro-model simulation analysis (Browne and
Immervoll, 2019) and regression analysis (Causa et al 2018). The main finding is
that policy changes during the past two
decades have contributed markedly to the decline in redistribution
. This was
primarily driven by cuts to cash income
support to unemployed households
, but also by cuts to the taxation of top incomes and income from capital, as globalisation
puts pressure on governments to shift away from highly mobile tax bases. At the same time, not all policy changes
went in the direction of reducing redistribution
: at lower earnings levels,
income taxes have frequently been reduced for low-income working families.

This is not to say that changes
in redistribution were entirely the result of changes in policy design.
  In several countries, structural factors such
as population ageing and changes in the composition of households and
unemployment rates have also had an impact. For instance, the extent of
redistribution through unemployment insurance transfers fell in countries
experiencing a decline in unemployment over the period under consideration.
However, the precise contribution of each of these structural factors to the
general decline in redistribution is difficult to assess as their impact cannot
easily be disentangled from that of policy changes.  

The motivation for the decline in redistribution after the mid-1990s

One objective behind the policy-induced reduction in
redistribution has been to raise employment and economic efficiency in
particular by strengthening work incentives (make-work-pay policies). In
principle, the pursuit of policies to bring more individuals into the job
market, especially among low-income households, might have succeeded in boosting
growth while at the same time reducing income inequality. In practice, the
continued rise in inequality observed in many countries since the mid-1990s suggests
that the positive employment effects of the tax and transfer policy reforms on
the income of poorer households have not been sufficient to compensate for the
reduction in redistribution.

Does this mean that in setting their redistribution policies government inevitably have to choose between more efficiency and less inequality?  Not necessarily.  

First, there is substantial variation in the extent of inequality reduction through taxes and transfers across the OECD area (Figure 1), including between countries that have similar GDP per capita and overall growth performance. Second, cross-country differences in income redistribution do not only reflect the levels of taxes and spending on cash transfers to the working-age population. They also reflect the extent to which personal income taxes are levied progressively with income levels and the extent to which cash transfers target less affluent households (Figure 2).

All this suggests that many OECD countries have scope for making their tax and transfer systems more redistributive without undermining efficiency. However, simply reversing the changes that have led to reduced redistribution is unlikely to be the most effective approach to reducing inequality.

Leveraging synergies between equity and efficiency objectives

Countries can learn from successful reform strategies that have
leveraged synergies between equity and efficiency objectives. Such is the case of stepping-up carefully
designed in-work benefits and credits
: these programmes should be as simple
as possible to make them accessible to potential recipients, and associated income
support should not be withdrawn too quickly as earnings rise to ensure that
work incentives are maintained.

More generally, tax and transfer reforms should be forward-looking, taking into account the rapidly changing context in which policy operates, not least technological developments, changes in the nature of work as well as ageing populations and the associated pressures on government budgets. For example:

  • Social protection systems should adapt to the emergence of non-standard forms of work. Technological change, among other factors, has led to an increase in non-standard form of work and reduced the coverage of traditional social protection systems that are often based on the model of full-time permanent work for a single employer. Alternative approaches might include designing new, tailor-made benefit schemes for non-standard workers, tying social protection entitlements to individuals rather than employment relationships or making social protection more universal.
  • Tax policy also needs to reflect rising top incomes and private wealth among ageing populations along with ongoing progress in international cooperation on taxation.  Although top earners are very responsive to changes in income tax rates, broadening tax bases and improving compliance might be a way to increase the tax collected from this group by limiting the scope for avoidance. The equity and efficiency case for increasing the overall progressivity of tax systems is supported by recent initiatives to enhance international cooperation in tax administration (e.g. automatic information exchange).

Finally, taxes and cash transfers are not the only policies that reduce inequality in OECD countries. A comprehensive strategy for tackling inequality requires policies that promote greater equality in market incomes (i.e. incomes before taxes and transfers), such as providing access to high-quality educational opportunities from early childhood to adult training, healthcare and jobs, especially to those facing disadvantages.

References:

Causa, O. , J. Browne and A. Vindics (2019)
“Income redistribution across OECD countries: main findings and policy
implications, OECD Economic Policy Papers, No. 23, OECD Publishing, Paris

Causa, O. and M. Hermansen (2017), “Income redistribution through taxes and transfers across OECD countries, OECD Economics Department Working Papers, No. 1453, OECD Publishing, Paris,
https://doi.org/10.1787/18151973

Browne,
J. and H. Immervoll (2018),“Have tax and transfer policies become less inclusive?
Results from a microsimulation analysis”, OECD Social, Employment and Migration
Working Papers, forthcoming.

Causa, O. A. Vindics and Oguzhan Akgun (2018) “An empirical investigation on the drivers of income redistribution across OECD countries, OECD Economics Department Working Papers, No. 1488, OECD Publishing, Paris https://doi.org/10.1787/18151973




Structural Policy Indicators Database for Economic Research: SPIDER on the web

by Égert Balázs, Peter Gal and Isabelle Wanner, OECD Economics Department

spider5.pngResearchers looking for empirical evidence on the relative impact of policy and non-policy drivers of economic growth know how much time and efforts can go into assembling a large database of policy variables and other determinants covering as many countries and years as possible. Even when such database can be patched-up from tapping into earlier studies, up-dating the series often requires going through a vast number of different data sources. Thanks to a recent OECD initiative, such task could be greatly facilitated from now on. A new OECD’s Structural Policy Indicators Database for Economic Research (SPIDER) is now available online and provides a broad range of data to researchers in ready-to-use formats to facilitate empirical/econometric research investigating the nature and the impact of structural policies. Available as a text file (TXT), STATA (.dta) and Eviews (.wf1) formats, the database includes about 500 policy and institutional indicators from almost 50 different OECD and non-OECD data sources. The policy variables stored in the database are annual or less frequently available (every five years or only once). The database will be updated on a yearly basis.

The database covers the following broad categories of policy variables: i) legal infrastructure and institutions describe features of the political system, the underlying legal institutions and indicators measuring the quality and various aspects of public governance; ii) framework condition policies include policies that condition the environment in which firms operate and make decisions such as the product market regulation (PMR/ETCR) indicators, the competition law and policy (CLP) indicator and a number of labour market institutions; iii) specific policies cover policies relating for instance exclusively to specific segments of the labour market (older workers, women or the youth) and include family benefits, policies influencing decisions to retire. Examples of other specific policies are measures primarily designed to support R&D investment or exports. Table 1 gives an overview on the main categories of variables included in SPIDER.

spidertable

Aimed primarily at helping researchers to kick-start empirical analysis by keeping the costs of assembling the required data very low, the usefulness of the SPIDER database to economic research can be demonstrated through the range of possibilities it offers in terms of assessing the impact of institutions and policies in growth regressions. For instance, it allows for runing cross-country time series growth regressions for OECD countries including indicators of product and labour market regulations with about 20 to 30 years of data. As an illustration, the scope of variables that can be included in several variants of growth regressions.

The analysis can also be extended to non-OECD countries, although in that case the time series dimension of the data will likely to be shorter and regulations and institutions will be measured by indicators available from non-OECD data sources. Finally, for purely cross-sectional regressions, with a very large set of indicators that also capture the geographical, social and cultural aspects, the number of observations reach about 90. These examples indicate the scope of the database for such an exercise.

Aside from facilitating cross-country/time-series empirical analysis, the new database is a one-stop shop where a large set of internationally comparable policy variables can be found and used to gauge in a more descriptive manner the magnitude of structural reform actions in specific countries and areas over a broad range.

References:

The database is described in more detail in Égert, Gal and Wanner (2017), “Structural policy indicators database for economic research (SPIDER)”, OECD Economics Department Working Paper No. 1429.




The G20’s Enhanced Structural Reform Agenda: Some progress, but more reforms needed

by Agnès Cavaciuti, Tomasz Kozluk, Dorothée Rouzet, Nicolas Ruiz and William Witheridge, OECD Economics Department

As G20 Finance Ministers and Central Bank Governors meet in Washington, there are signs that the growth prospects for their economies are improving. Recent indicators point to rising business confidence and industrial production in many countries, and fiscal initiatives in major economies are helping to support activity.

A pick-up for the global economy in 2017 would be very welcome after five years of sluggish growth, but we have not yet decisively escaped the low-growth trap. Productivity and wage growth remain weak, and inequality and political uncertainties are high. Financial vulnerabilities and policy risks could derail the recovery. In short, the G20 has yet to achieve its objective of strong, sustainable, balanced and inclusive growth.

In a push to address these challenges, under the Chinese Presidency in 2016 the G20 agreed to an Enhanced Structural Reform Agenda. This comprised G20 priority areas and guiding principles for structural reform, and a system of quantitative indicators to track the evolution of policy settings and outcomes. The OECD was tasked to assess progress and has just delivered the first report under the G20’s Enhanced Structural Reform Agenda to Ministers and Governors. It provides an overview of collective G20 progress and individual notes assessing progress for each G20 member country since the onset of the crisis.

The report shows that the G20 has made progress recently in a number of areas. Emerging economies have undertaken significant reforms to boost productivity by promoting trade and competition, improving infrastructure and encouraging innovation. In advanced economies, policy actions have generally focused on boosting employment and skills after labour markets were hit by the crisis. Employment outcomes are mixed, with the share of people in work having fallen since the crisis in China, India, Japan and the US, but increased in Germany, Indonesia, Turkey and the UK. However, overall productivity performance for the G20 has been disappointing, with labour productivity growth falling significantly since the crisis.

 

20blo

While inequality has been decreasing for the G20 collectively, it has increased within many G20 countries. Poor outcomes and stagnation for people with low and middle incomes, particularly in advanced economies, raise concerns that many are not sharing in the gains from growth. Some progress has been made on environmental sustainability, but G20 countries have yet to act in order to achieve the long-term objectives set out in the Paris agreement.

In addition, we should be concerned about a waning of ambition on structural reform –for example, the OECD’s recent Going for Growth 2017 report shows that the pace of reforms has slowed in recent years. In particular, the G20’s policy actions can be stepped up on promoting trade and investment openness, reforming tax structures and improving public spending efficiency. Much more can also be done to achieve greater inclusiveness through pro-growth structural reforms and reform packages that reduce inequalities.

The specific structural reform priorities under the G20’s Enhanced Structural Reform Agenda differ across countries, but each G20 country can pursue more ambitious policy packages to boost productivity and inclusiveness together. By identifying the areas where progress is needed, this report helps countries to develop and deliver ambitious Growth Strategies for the Hamburg Summit in July. Doing so would help to ensure a strong recovery and put the global economy on a higher and more inclusive growth path.

References

OECD Technical Report on Progress on Structural Reform Under the G-20 Enhanced Structural Reform Agenda, April 2017.

OECD Going for Growth 2017, March 2017.




Italy’s reforms are paying off but challenges remain

By Mauro Pisu, Head of Italy Desk, Country Studies Branch, OECD Economics Department

Italy is recovering after a deep and long recession. Structural reforms, accommodative monetary and fiscal conditions, and low commodity prices have spearheaded the ongoing economic recovery. The Jobs Act and social security contributions’ exemptions jolted the labour market, leading to rising employment and higher consumer spending. Additional reforms in different areas, such as the school system, public administration, budget making process, banking system have been passed and implemented or are in the course of implementation. Greater focus has also been put on past reforms, with a sharp reduction in the backlog of decrees needed to implement them. The rejection of the constitutional reform by referendum in December 2016 has heightened political uncertainty but as discussed in the recently released OECD Economic Survey of Italy, the structural reform process must continue if Italy is to build a more inclusive and prosperous society.

Despite the recent macroeconomic progress, the pace of the ongoing recovery remains modest (Figure 1). Productivity continues to decline and investment growth is weak. Public-administration inefficiencies, slow judicial processes, poorly designed regulation and weak competition still make it difficult to do business in Italy. Labour and capital resources are trapped in low-productivity firms, which hold down wages and well-being. Innovative start-ups and SMEs continue to suffer from difficult access to finance, especially through the corporate bond and equity markets. The Italian banking system features low profits and a large stock of non-performing loans, discouraging lending and investment.

italy-gdp-and-employment-1

Boosting investment is key to strengthening the recovery and increasing labour productivity.  Raising investment will hinge on enhancing business dynamism, improving insolvency procedures, strengthening the innovation system and targeting innovation incentives towards innovative SMEs and start-ups. Restructuring the banking sector to improve governance and raise efficiency, and inducing banks to dispose of their bad debts, is key to restarting lending to firms.

The long crisis has eroded social inclusion, requiring renewed efforts to raise employment, reduce poverty, especially among youths and children, and improve skills. Strengthening further job creation, by lowering social security contributions, is crucial to increasing the employment rate, which, which despite recent improvements is still one of the lowest among OECD countries. Further progress on combating tax evasion, introducing a real estate tax based on updated cadastral value and cutting the numerous tax expenditures devoid of any economic and social rationale could offset the revenue lost by reducing social security contributions.

The crisis has also lead to sharp increase in poverty, especially among the young and children, which the weak economic recovery has not yet enabled to reverse (Figure 2). For instance, the absolute poverty rate of families with 1 or 2 children rose from 1.1 and 2.3% in 2006 to 4.9 and 8.6% in 2015. Over the same period, the absolute poverty rate among old people remained broadly stable. Ample empirical evidence has shown the large negative effects poverty experienced at young age has on school results as well as adult income and health status. It is of the utmost importance to implement the recently launched National Plan against Poverty, whose main aim is to establish a new nation-wide antipoverty programme (Reddito di Inclusione, REI). The allocated funds are still limited but are an improvement compared with the currently available resources. The government should ensure that the new programme is sufficiently funded to substantially reduce poverty among young children.

italy-2-poverty

References:

OECD (2017), OECD Economic Surveys: Italy 2017, OECD Publishing, Paris.