OECD Economic Studies No. 42, 2006/I

Contents | How to obtain this publication | Additional information

Contents                                                                                                               

The determinants of unemployment across OECD countries: Reassessing the role of policies and institutions
Andrea Bassanini and Romain Duval
This paper explores the impact of policies and institutions on unemployment in OECD countries over the past decades. Reduced-form unemployment equations, consistent with standard wage setting/price-setting models, are estimated using cross-country/time-series data from 21 OECD countries over the period 1982-2003. In the “average” OECD country, high and long-lasting unemployment benefits, high tax wedges and stringent anti-competitive product market regulation are found to increase aggregate unemployment. By contrast, highly centralised and/or coordinated wage bargaining systems are estimated to reduce unemployment. These findings are robust across specifications, datasets and econometric methods. The paper also finds evidence of interactions across policies and institutions, as well as between institutions and shocks. Some specific interactions across policies and institutions are found to be particularly robust, notably between unemployment benefits and public spending on active labour market programmes as well as between statutory minimum wages and the tax wedge. Finally, it is shown that macroeconomic conditions also matter for unemployment patterns, with their impact being shaped by policies.

An empirical investigation of political economy factors behind structural reforms in OECD countries
Jens Høj, Vincenzo Galasso, Giuseppe Nicoletti and Thai-Thanh Dang
In an empirical investigation, the paper identifies the main political economy drivers of structural policy changes in OECD countries’ labour and product markets over the 1985-2003 and 1975-2003 periods respectively. The core empirical results, based on a set of policy indicators that cover 21 countries, suggest that factors that are beyond government control have an important influence on the implementation of structural reform, including economic crises, exposure to foreign competition, and government’s duration in office. Nonetheless, a number of factors that governments can control, including budgetary conditions and spillovers across policy areas – in particular from the product to the labour market – are also important to both initiate and sustain reforms.

Time as a trade barrier: Implications for low-income countries
Hildegunn Kyvik Nordås
This paper analyses the relation between time for exports and imports, logistics services and international trade. Time is found not only to reduce trade volumes, but more importantly lengthy procedures for exports and imports reduce the probability that firms will enter export markets for time-sensitive products. Furthermore, a broader range of products are becoming time-sensitive following the proliferation of modern supply chain management in manufacturing as well as retailing. Labour-intensive products such as clothing and consumer electronics are increasingly time-sensitive and many developing countries urgently need to shorten lead time in order to stay competitive in these sectors.

Environmental policy, management and R&D
Nick Johnstone and Julien Labonne
Using data collected through a survey of over 4 000 manufacturing facilities in seven OECD countries the determinants of investments in environmental research and development (R&D) are assessed. It is found that perceived environmental policy stringency has a positive effect on the decision to invest in environmental R&D, and some support is provided for the view that more flexible environmental policy instruments such as performance standards and economic instruments have a positive effect on such investments. The results also indicate that the way in which environmental issues are managed within a facility affects the decision to invest in environmental R&D.

Does distance matter? The effect of geographic isolation on productivity levels
Bryn Battersby
Over the past 40 years, Australia’s labour productivity level relative to the United States has trended slowly upwards. However, there remains a substantial gap between productivity levels in Australia and the United States. The persistence of this gap has raised questions about whether there are factors that might limit the extent to which Australia can catch up to the United States. This paper provides an initial investigation of the link between distance and labour productivity levels. Parameters of a simple labour productivity equation are estimated for the states of the United States and Australia. This equation includes an indicator that captures the size of the economy of the state, the state’s distance to other economies and the size of those other economies. The regressions find that this indicator is a significant determinant of state productivity levels and that Australia’s isolation from world economic activity accounts for around 45% of the gap in labour productivity between Australia and the United States.

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