OECD Economic Studies No. 22, Spring 1994

Active labour market policy and unemployment - a framework for the analysis of crucial design features

Lars Calmfors

The paper develops a framework for the analysis of active labour market policies and uses that to structure various effects on wage setting, labour demand and labour supply. The empirical evidence on wage and employment effects is surveyed. Several design features are seen as crucial for success: compensation below market wages, strong emphasis on counselling and placement activities, targeting and avoiding the use of active programmes as a means of prolonging the duration of unemployment benefits. The conclusion is that most European countries are likely to do better with more of active labour market programmes but not a lot better.

Medium-term determinants of OECD productivity

A. Steven Englander and Andrew Gurney

This article reviews the theoretical and empirical literature on the sources of medium-term productivity growth and provides an empirical analysis of labour and total factor productivity (TFP) growth in the business sectors of OECD economies. Higher education levels, low initial productivity levels, moderate labour force growth and low inflation are the factors found to be associated with faster TFP growth. Faster capital accumulation accelerates labour productivity growth, but no evidence is found for a TFP growth bonus. Neither this article nor the other empirical studies examined can explain a significant portion of the productivity growth slowdown.

OECD productivity growth: medium-term trends

A. Steven Englander and Andrew Gurney

This note updates data on levels and growth rates of labour and total factor productivity in the business sectors of OECD countries. Productivity levels across countries are made comparable through the use of 1990 purchasing power data. While convergence has continued through the 1980s in productivity levels, considerable variation remains across OECD countries. Only limited evidence was found to suggest that there had been any pick-up in trend productivity growth during the 1980s.

Market structure, trade and industry wages

Joaquim Oliveira Martins

This paper investigates the links between trade flows and industry relative wages for a cross-section of 22 sectors in 12 OECD countries. First, the industries are classified according to stylised facts about market structure. Second, import penetration trends are analysed during the period 1970-90, with special focus on imports from Asian NIEs. Finally, a wage equation is estimated encompassing both the characterisation of industries by type of market structure and measures of import penetration and export intensity. The results show that the impact of import penetration on wages is negative in industries with low product differentiation whereas the reverse result occurs in industries with high product differentiation and market segmentation.

Monetary policy credibility and price uncertainty: the New Zealand experience of inflation targeting

Andreas M. Fischer and Adrian B. Orr

The effects on price uncertainty arising from the legislation of anti-inflation policies in New Zealand are assessed using the standard deviation of price-related expectations across respondents drawn from the Reserve Bank of New Zealand Survey. Also examined is whether diverging views about the current and future stance of monetary policy significantly contribute to price uncertainty. Legislative factors which enhance central bank independence are shown to reduce future price uncertainty and mitigate political influences. However, uncertainty relating to the stance of monetary policy increases price uncertainty, suggesting a transparent operation augments the benefits of inflation targets.

The effects of net transfers on low incomes among non-elderly families

Michael F. Forster

In considering the possible effects of different tax and transfer systems in OECD countries, efficiency concerns have been the centre of the social-policy debate. There has, however, been a growing interest in assessing the extent to which these policies have succeeded in alleviating poverty. This article uses micro data for 11 OECD countries and concludes that simple and comprehensive measures of poverty are reduced once allowance is made for net transfers. The analysis explores different country patterns and shows the relative contributions of three elements to poverty reduction: incidence, intensity and inequality of low incomes.