Productivity and long term growth

Going for Growth 2018 - Argentina note

 

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Going for Growth is the OECD flagship report analysing structural policy settings and economic performance to provide policymakers with concrete reform recommendations to boost growth and ensure that the gains are shared by all. The 2018 Interim Report reviews the main growth challenges and takes stock of reforms enacted over the past year -- in both advanced and emerging economies -- on policy priorities identified in the previous issue of Going for Growth.

Country highlights

The gap in GDP per capita relative to the leading OECD countries is sizeable and has not narrowed over the last years, reflecting both low productivity and employment. Investment growth has been stagnant, with an important infrastructure gap that needs to be addressed. Poverty and inequality remain high by OECD standards and, together with the poor quality of education, contribute to low social mobility.

Priority should be given to ensuring that the multiple recent reform efforts are fully implemented. More needs to be done in lowering barriers to entry and competition in product markets and services to unleash the growth potential via a more efficient allocation of resources. Reducing educational inequalities and improving skills acquisition would also increase employment, labour productivity and promote social mobility. Improving access to quality childcare would encourage higher labour participation of women and foster growth and inclusiveness. Reforms to raise the efficiency of the tax system are crucial to boost productivity and would help fiscal consolidation.

 

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Going for Growth 2017 recommendations include:

  • Reduce regulatory burden by reducing barriers to trade and entrepreneurship; easing employment protection legislation to ensure a better functioning of the labour market and to reallocate resources towards more productive activities. Promote foreign trade by establishing simple, transparent and effective administrative procedures, in line with OECD best practices.
  • Enhance outcomes and equity in education by (i) investing more in early childhood education to reduce the gap due to family environments early in life; (ii) reshaping teacher careers by ensuring that teacher preparation programmes better select and train candidates; (iii) investing in new teachers by supporting their professional growth early on; (iv) strengthening vocational education and training and (v) promoting the participation of more women in the fields of engineering and computer science; (vi) strengthening the linkages between tertiary education and the labour market and (vii) properly assessing and anticipating skills needs to boost innovation and respond to future labour-market needs.
  • Improve infrastructure and reduce regional disparities by implementing planned infrastructure projects, such as the Plan Belgrano, the electrification of the remaining railways lines and the Regional Express Net, which will promote connectivity and intraregional trade within the country; improving the capacity of subnational governments to execute projects without unnecessary delays. Use public-private partnerships (PPPs) for infrastructure investment in the context of the recently passed PPP law, striking the right balance of risks between the public and private sectors.
  • Facilitate the labour force participation of women by strengthening active labour market policies to help improve skills and promote employment opportunities for women; continuing to improve access to quality childcare for children under 3 years of age. Promote gender diversity in leadership positions in the public sector and private companies, notably by establishing gender goals in management; bringing gender issues into the public debate through information campaigns and introducing policies to modify gender roles.
  • Increase the efficiency of the tax system by moving away from distortive taxes such as provincial revenue-based taxes and those on financial transactions; broadening tax bases in personal income taxation and eliminating loopholes like the preferential tax treatment of certain investment incomes. Continue to reduce payroll taxes for new people entering the labour market to encourage formalisation.

Recent policy actions in these areas include:

  • The tax system has been made more efficient with a reform that will gradually reduce the provincial turnover tax and the financial transaction tax. The base for personal income tax will be also broadened as capital income will start to be taxed, which will increase progressivity. A reduction in employers’ social security contributions for low-skilled workers will encourage formal employment. The reform will also reduce corporate tax rates from 35% to 25% for reinvested profits. These changes will be phased in gradually over the next 5 years. 
  • Barriers on start-ups have been reduced through the new entrepreneurship law.
  • Investment in infrastructure has been enhanced with the development of new public-private partnerships (PPPs) in the energy sector and for the construction of an airport terminal.

Further reading:

Argentina: Latest Economic Forecast

Argentina: Latest Economic Survey

 

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