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Contents | How to obtain this publication | Additional information
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OECD Economic Studies is the twice-yearly journal of the OECD Economics Department. This issue deals with the following topics:
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Contents
Taxation and business environment as drivers of foreign direct investment in OECD countries
Dana Hajkova, Giuseppe Nicoletti, Laura Vartia and Kwang-Yeol Yoo
This paper assesses the importance of taxation on foreign direct investment, relating to bilateral FDI among OECD countries over the 1990s to new estimates of corporate tax wedges on income from FDI and controlling for a large set of additional policy and non-policy factors that may affect the attractiveness of a country for foreign investors. Furthermore, the empirical approach is novel in that it focuses on a semi- parametric estimation methodology that accounts for a number of unobserved effects possibly impinging on the choice of investment location by multinational enterprises. Consistent with previous findings, the estimation results suggest that corporate taxation has a non-negligible impact on FDI location choices. However, the results also suggest that analysis focusing only on taxation in home and host countries and omitting other characteristics of business environment (such as border policies and labour and product market settings) may lead to a serious overestimation of tax elasticities with a risk of drawing misguided implications for policy.
Product market regulation and productivity convergence
Paul Conway, Donato De Rosa, Giuseppe Nicoletti and Faye Steiner
This paper investigates the effect of product market regulations on the international diffusion of productivity shocks. The empirical results indicate that restrictive product market regulations slow the process of adjustment through which best practice production techniques diffuse across borders and new technologies are incorporated into the production process. This suggest that remaining cross-country differences in product market regulation can partially explain the recent observed divergence of productivity in OECD countries, given the emergence of new general-purpose technologies over the 1990s. The paper also investigates two channels through which product market regulations might affect the international diffusion of productivity shocks, namely the adoption of information and communications technology and the location decisions of multi-national enterprises. In both cases the effect of anti-competitive product market regulation is found to be negative and significant.
Regulation of financial systems and economic growth in OECD countries: An empirical analysis
Alain de Serres, Shuji Kobayakawa, Torsten Sløk and Laura Vartia
This paper examines whether regulation that is more conducive to competitive and efficient financial systems has a significant positive impact on sectoral output and productivity growth in a sample of 25 OECD countries. More specifically, following a methodology used by Rajan and Zingales (1998), the paper tests whether industries that depend more heavily on external sources of funding tend to grow faster in countries that have more competition-friendly regulation in markets for banking services and financial instruments. The regulatory indicators are assembled from surveys conducted by the World Bank on regulations in banking and securities markets. They point to substantial variations in the stance of regulation across countries, in particular with respect to the broad rules underpinning securities market transactions. The empirical analysis indicates that financial system regulation matters for output growth both in a statistical and economic sense.
The drivers of public expenditure on health and long-term care: An integrated approach
Joaquim Oliveira Martins and Christine de la Maisonneuve
This paper proposes a framework for projecting public health and long-term care expenditures. It considers demographic and other (non-demographic) drivers of expenditures. The paper extends demographic drivers by incorporating death-related costs and the health status of the population. Concerning health care, the projections incorporate income and the effects of technology cum relative prices. For long-term care, the effects of increased labour participation, reduction of informal care and Baumol’s cost disease are taken into account. Using this integrated approach, public health and long-term care expenditures are projected for all OECD countries. Alternative scenarios are simulated, together with sensitivity analysis. Depending on the scenarios, total OECD health and long-term care spending is projected to increase in the range of 3.5 to 6 percentage points of GDP for the period 2005-50.
Less than you thought: The fiscal autonomy of sub-central governments
Hansjörg Blöchliger and David King
The common indicator to assess fiscal power of sub-central governments is the share of sub-central to total tax revenue. But this indicator says nothing about the true discretion sub-central jurisdictions have over tax rates and the tax base, and it skips revenue from intergovernmental grants entirely. The main purpose of this paper is to develop and analyse a set of more refined indicators that assess the true autonomy sub-central governments have over fiscal resources. In sum, fiscal autonomy is considerably lower than the simple ratio suggests. About 60% only of own tax revenue is under full or partial control of sub-central governments, and again 60% only of transfer revenue is unconditional. Moreover, contrary to the allegations of fiscal federalism theory, much sub-central tax revenue comes from mobile income taxes and is prone to tax erosion. The new database can help assess how fiscal autonomy affects policy outcomes such as public sector efficiency, equity in access to public services or the long-term fiscal stance.
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Additional information
All previous issues of the OECD Economic Studies are available for downloading.
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