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Reform progress in OECD countries uneven, says Going for Growth

 

04/03/2008 - Governments in many OECD countries have made good but uneven progress over the past 12 months in implementing the economic reforms needed to improve living standards, according to the OECD's latest Going for Growth report.

"Overall, substantial progress has been achieved in the areas of product market deregulation, education reforms and taxation," said Angel Gurría, Secretary-General of the OECD. But he added: "Reforms of labour market policies have been much less impressive."

OECD studies show that to raise living standards through economic growth and wealth generation, it is essential to improve labour productivity and remove impediments to work. Going for Growth 2008 assesses the extent to which governments have followed the country-specific policy recommendations to boost growth published in last year's report. It finds that during 2007 governments took action in almost two-thirds of the priority areas identified.

But more reforms were undertaken to improve productivity than to reduce obstacles to work. Competition-restraining regulations in the energy sector, for instance, have been eased in a number of countries. Also, public sector efficiency has been improved where weaknesses were identified. But in labour markets, there has, for example, been little attempt to reform job protection laws in countries where they are regarded as too rigid.

Presenting the report, Gurría said more progress could have been achieved given the relatively strong economic performance of most OECD countries over the past year (read the speech). Short-term adjustment costs of reform are easier to absorb during cyclical upturns, he said, but added: "Experience shows that good economic conditions may in fact slow down reforms as they temporarily mask underlying weaknesses. That is one of the cruel paradoxes of the political economy of reform."

Going for Growth includes five special chapters which analyse ways to make economies more  productive and create jobs. Some of the key findings from the chapters are as follows:

  • Longer weekly working hours in America than in Europe mainly reflect the differences in  the number of hours worked by women. Europe's higher marginal tax rates largely explain why European women employees generally work fewer hours.
  • Geographic factors still limit trade and influence living standards. Australia and New Zealand's geographical remoteness reduces their gross domestic product (GDP) per head relative to the OECD average, while the proximity of Belgium and the Netherlands to world markets boosts theirs.
  • If OECD countries were to align each of their competition-restraining rules with the least restrictive stance in the OECD area, the resulting  increase in trade in services could  give a significant boost gross domestic product (GDP) per head.
  • Efficiency in primary and secondary schools in OECD countries could be enhanced by a large margin if they were to  adopt  national and international best practice.
  • Raising the number of people graduating from university could be achieved by offering different funding options to encourage students to invest in higher education, by increasing tuition fees to provide education establishments with more resources and by providing greater scope for innovation by the educational institutions themselves.

To obtain a copy of Going for Growth 2008: Economic Policy Reforms or for further information, journalists are invited to contact the OECD's Media Division (tel: +33 1 4524 9700). The publication can be purchased in paper or electronic form through the OECD's Online Bookshop. Subscribers and readers at subscribing institutions can access the online version via SourceOECD.

Going for Growth 2008

 

Jorgen Elmeskov, acting Chief Economist of the OECD, explains how the Going for Growth report asesses progress - or lack of it - in implementing the reforms needed to boost productivity and jobs in each OECD country. Reforms have been most prevalent during economic downturns, although adjustment costs of reform during such periods are much higher than if action is taken when the economy is booming.

 The Costs of Distance

 

Transportation costs have hardly fallen during the past 30 years, says OECD economist Hervé Boulhol in a paper published in the latest Going for Growth report. Listen to his explanation of how this is handicapping economies far away from world markets and how Australia and New Zealand nevertheless remain competitive traders in world markets.

 Click here  for more OECD videos, podcasts and webcasts.