Foundations for Growth and Competitiveness 2026

Norway

While Norway’s per capita GDP is among the highest across OECD countries, this partly reflects petroleum activity. Over the past decades, trend growth in mainland activity has weakened notably, largely due to a marked decline in multifactor productivity growth, which has been constrained by stringent regulations in some areas. Although the employment rate is slightly higher than the OECD average, trend employment growth has been somewhat lower than in other Nordic countries.

Compared to other OECD countries, Norway has prioritised reforms in areas such as regulatory frameworks for physical infrastructure, product market regulations and insolvency regimes. Continuing reforms in these areas is essential to restoring productivity growth, promoting investment, including from abroad, and further integrating into global value chains. Reducing labour taxation and reforming the disability scheme would stimulate labour force participation.

Economic performance

Gaps to the average of the upper half of the OECD countries

Source: Panel A: OECD, Economic Outlook database; Panel B: OECD, Labour Force Statistics database; Panel C: OECD, Economic Outlook and Productivity databases; Panel D: OECD, Economic Outlook and Annual National accounts, GFCF by assets databases.

Selected policy gaps

Source: OECD calculations based on the Foundations for Growth and Competitiveness database.

Regulation: Improve product market regulation to facilitate firm entry

Product market regulation in Norway is generally moderate, but the administrative and regulatory burden for startups is higher than in many other OECD countries. Norway also has greater scope to improve the rules for engaging stakeholders in the design of new regulations than many other OECD countries. Since new firms have a comparative advantage in adopting new technologies, easing market entry would strengthen market discipline and boost productivity growth.

Recommendations

✓ Streamline administrative procedures for business startups by strengthening the coordination among licence issuers.

✓ Require new licences issued by public bodies to be risk-proportionate and review existing licences periodically.

Regulation: Strengthen insolvency regimes to support credit and startups

Insolvency regimes play a critical role in increasing the possibility of successfully restructuring viable firms and maximising the liquidation value of failing ones. While Norway’s insolvency regimes are overall solid, there is room for improvement in restructuring proceedings. Moreover, reducing excessive penalties for bankrupt entrepreneurs could foster a more dynamic startup environment.

Recommendations

✓ Strengthen the restructuring-plan voting system to facilitate decision-making, while introducing safeguards for dissenting creditors.

✓ Shorten the time to discharge, allowing bankrupt individuals to exempt future earnings from obligations to repay pre-bankruptcy debts more quickly.

Infrastructure: Reform institutional frameworks on public infrastructure

Norway's public investment is substantial, particularly in transport infrastructure. While the stock of public infrastructure capital is already very high, the risk of selecting cost-inefficient projects is comparatively high. Strong regulatory frameworks for public infrastructure and governance of regulators can help identify projects with a high net marginal return of public investment.

Recommendations

✓ Prioritise the benefit-cost ratio in the selection of infrastructure projects, for example, by introducing a binding minimum benefit-cost ratio to filter out projects with apparently very weak benefits.

✓ Conduct ex-post evaluations more frequently to assess the performance and outcomes of infrastructure planning, thereby helping decision-making.

Tax efficiency: Reduce personal income taxation to boost labour supply

Personal income taxation in Norway is high, particularly for low-income individuals, which could reduce work incentives. The statutory income tax rates adjusted for deductions and benefits are among the highest across OECD countries – excluding countries with some very low social security contribution rates. This contrasts with the taxation of owner-occupied housing, which remains among the lightest in the OECD and could distort demand between homeownership and rental housing.

Recommendations

✓ Step up efforts to significantly reduce personal income taxation.

✓ Gradually phase out the favourable tax treatment of homeownership by making mortgage interest payments no longer tax deductible or by taxing imputed rent.

Labour force participation: Reform the sickness and disability schemes

Sickness absence and disability benefit recipiency levels in Norway are among the highest across OECD countries. Sick-leave compensation and disability benefits are very generous, with light eligibility conditions, allowing many individuals who could potentially return to work to remain beneficiaries. Over time, this dependency further reduces the chance of re-entering the workforce. Not only does this lower employment, but it also leads to disengagement from working life and high fiscal costs.

Recommendations

✓ Reduce the sick leave compensation rate towards the levels in other Nordic countries.

✓ Strengthen early intervention through preventive measures or rehabilitation, ensuring that sick-leave compensation beneficiaries do not remain in the benefit schemes permanently.

✓ Strengthen the eligibility criteria for disability benefits by introducing an independent medical assessment.

Recent progress on structural reforms

Starting in 2023, Norway no longer requires EEA residency or a local office to become a registered accountant. A recent initiative, the Norwegian Inclusive Workplace Agreement, introduced several measures aiming at preventing transitions from employment to disability benefits, including enhanced training opportunities. The 2024 pension reform will gradually increase the statutory pension age, partly linking it to rising life expectancy.