OECD Economic Studies No. 8, Spring 1987

Current-account imbalances and adjustment mechanisms

Andrew Dean and Val Koromzay

This paper focuses on the large current-account imbalances among OECD countries that have emerged over the past several years, and on how the evolution of these imbalances might be influenced by various hypothetical changes in the world economy. Quantitative estimates of how exchange-rate changes, changes in relative growth rates among countries or government budget actions might affect external balances are presented. Particular emphasis is given to an analysis of the various channels through which changes in specified variables affect external imbalances, and an assessment of the relative importance of these channels.

Internationalisation of financial markets and the allocation of capital

Mitsuhiro Fukao and Masaharu Hanazaki

This article analyses the effects of the internationalisation of financial markets on the allocation of capital. It examines the increased integration between domestic and international financial markets and the tendency towards convergence of real interest rates among financially open countries. The article then deals with long-term implications for the international allocation of capital, with emphasis on tax distortions. Using estimated tax wedges for business investment and the supply block of OECD’s INTERLINK system it show that, under integrated financial markets, the tax distortions could generate a large imbalance in a country’s net external asset position, involving a significant welfare cost.

International comparisons of tax levels: pitfalls and insights

K.C. Messere and J.P. Owens

International tax statistics are frequently used to compare tax burdens and the extent of government intervention in the economy. This article examines the conceptual and practical problems encountered when making such comparisons and identifies similarities and differences in tax level trends in OECD Member countries. It also provides some explanations for these trends.

Microeconomic changes and macroeconomic wage disinflation in the 1980s

James H. Chan-Lee, David T. Coe and Menahem Prywes

Since 1980 there has been an important decline in wage inflation and also a renewed emphasis on enhancing the supply-side flexibility of economies. This article surveys changes in microeconomic policies affecting the labour market, and in wage-setting practices. Although there have been an impressive number of new developments, for any single country most of the changes have been relatively modest and comparatively recent. The article then discusses how these changes might affect aggregate wage developments and attempts a quantitative assessment of their significance.

Goods and services in OECD countries

Derek Blades

Service activities, broadly defined to cover all activities that do not result directly in the production of goods, now account for the major part of GDP and employment in OECD countries. This article examines the relative importance of different service activities in terms of their contribution to GDP and employment and their growth rates over the last two decades. "Services" cover a disparate collection of activities which have experienced widely differing growth rates. It is helpful to distinguish between at least three groups - collective services provided by government, services linked to goods production, and what are here termed "free-standing" services.