Economic policy reforms 2011 : going for growth.

241 Pages·2011·7.996 MB·English

by  OECD

Economic Policy Reforms 2
0
1
1
Going for Growth
2011
The global recovery from the deepest recession since the Great Depression is under way, but it remains
Economic Policy Reforms
overly dependent on macroeconomic policy stimulus and has not yet managed to signifi cantly reduce high
and persistent unemployment in many countries. Going for Growth 2011 highlights the structural reforms
needed to restore long-term growth in the wake of the crisis. For each OECD country and, for the fi rst time, Going for Growth
six key emerging economies (Brazil, China, India, Indonesia, Russia and South Africa), fi ve reform priorities
are identifi ed that would be most effective in delivering sustained growth over the next decade. The analysis
shows that many of these reforms could also assist much-needed fi scal consolidation and contribute to
reducing global current account imbalances.
The internationally comparable indicators provided here enable countries to assess their economic
performance and structural policies in a wide range of areas.
2011
In addition, this issue contains three analytical chapters covering:
• Housing policies.
• The effi ciency of health care systems.
• The links between structural policies and current account imbalances.
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ISSN 1813-2715
2011 SUBSCRIPTION
-:HSTCQE=U^WZ\U:
ISBN 978-92-64-09257-0
www.oecd.org/publishing
12 2011 03 1 P

Economic Policy Reforms
2011
GOING FOR GROWTH
This work is published on the responsibility of the Secretary-General of the OECD. The
opinions expressed and arguments employed herein do not necessarily reflect the official
views of the Organisation or of the governments of its member countries.
Please cite this publication as:
OECD (2011), Economic Policy Reforms 2011: Going for Growth, OECD Publishing.
http://dx.doi.org/10.1787/growth-2011-en
ISBN 978-92-64-09257-0 (print)
ISBN 978-92-64-09258-7 (PDF)
Periodical:Economic Policy Reforms
ISSN 1813-2715 (print)
ISSN 1813-2723 (online)
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© OECD 2011
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Going for Growth was launched in 2005 as a new form of structural surveillance
complementing the OECD's long-standing country and sector-specific surveys. In line with
the OECD's 1960 founding Convention, the aim is to help promote vigorous sustainable
economic growth and improve the well-being of OECD citizens.
This surveillance is based on a systematic and in-depth analysis of structural policies and
their outcomes across OECD members, relying on a set of internationally comparable and
regularly updated policy indicators with a well-established link to performance. Using these
indicators, alongside the expertise of OECD committees and staff, policy priorities and
recommendations are derived for each member and, starting from the 2011 edition, six key
non-member economies with which the OECD works closely (Brazil, China, India, Indonesia,
Russia and South Africa). From one issue to the next, Going for Growth follows up on these
recommendations and priorities evolve, not least as a result of governments taking action on
the identified policy priorities.
Underpinning this type of benchmarking is the observation that drawing lessons from
mutual success and failure is a powerful avenue for progress. While allowance should be
made for genuine differences in social preferences across OECD members, the uniqueness
of national circumstances should not serve to justify inefficient policies.
In gauging performance, the focus is on GDP per capita, productivity and employment. As
highlighted in the past and again in this issue, this leaves out some important dimensions
of well-being. For this reason, Going for Growth regularly features thematic chapters
dedicated to these other dimensions, and increasingly looks at the side effects of growth-
enhancing priorities on other government policy objectives.
Going for Growth is the fruit of a joint effort across a large number of OECD Departments.
www.oecd.org/economics/goingforgrowth
ECONOMIC POLICY REFORMS 2011: GOING FOR GROWTH © OECD 2011 3
EDITORIAL
Editorial
The Many Dividends from Structural Reform
T
he global recovery has been underway for some time now, but it remains uneven. Emerging
market economies are growing strongly, while growth in OECD economies has been insufficient to
significantly reduce unemployment from its post-crisis peak with all of the attendant human and
social costs. Global payment imbalances are widening again. How sustainable post recession global
growth will be? Policy driven recovery has still not been fully replaced by self sustained, job rich
growth, especially in advanced economies. At the same time policy space is reaching its limits, in
both the fiscal and monetary policy domains. Monetary policies have been stretched to their limits,
and public budgets are in need of consolidation – and indeed most OECD governments are tightening
fiscal policy in2011and beyond. In addition, the recovery takes place against the background of
permanent scars from the recession that, while difficult to assess precisely, are associated with
output losses in most advanced economies that are likely to persist for several years.
In such a scenario structural policy reforms provide the main available policy lever to speed up
the recovery and raise global growth over the coming years, while at the same time offering
significant contribution to global rebalancing and fiscal consolidation, as discussed in Chapter1 of
this year’s edition. Financial markets are also doing a better job at pricing longer-term economic
prospects –and therefore the effects of reforms (or lack thereof) –in bond yields now than in the past,
further strengthening the case for action. Although more needs to be done to address key issues such
as systemic risk or non-bank financial institutions, financial regulation reform is on its way, with
capital, liquidity and leverage ratios for banks due to be raised or introduced across the OECD.
Efforts need to be stepped up in other areas, where structural reforms have been rather modest since
the start of the crisis.
Structural policy reforms have gained prominence in the G20context since the Mutual
Assessment Process was set up at the2009 G20summit in Pittsburgh. The OECD has relied on
Going for Growth to contribute to assessing the policy commitments made by G20countries and
identifying further reforms to improve global outcomes. Indeed this new edition of Going for
Growth identifies five key priorities to boost long-term growth for each individual OECD country–
including Chile, Estonia, Israel and Slovenia, which joined the organisation in2010– and, for the
first time, for key emerging countries with which the OECD works closely, namely Brazil, Russia,
China, India, Indonesia and South Africa – the so-called BRIICS. These recommendations provide
readily-available benchmarks against which domestic reform plans can be, and indeed have been
assessed.
For OECD countries, a number of these Going for Growth recommendations could deliver
much-needed short-term growth benefits, such as reductions in entry barriers in sectors with strong
immediate job-creation potential like retail trade or liberal professions. Many priorities would also
alleviate risks that low current employment levels become permanent, such as reforms of social
4 ECONOMIC POLICY REFORMS 2011: GOING FOR GROWTH © OECD 2011
THE MANY DIVIDENDS FROM STRUCTURAL REFORM
transfer programmes and activation policies. Some policies that have not traditionally featured high
on the Going for Growth agenda, such as work-sharing arrangements, cushioned unemployment
and helped workers stay in contact with the labour market during the recession. New OECD analysis
will have to draw the full policy lessons from these experiences. Other labour market policy responses
to the crisis, such as extensions in the coverage of unemployment benefits, helped to mitigate
hardship on workers and could usefully stay in place. Some policy responses, such as extended
duration of benefits, have also provided necessary protection during the recession and its aftermath
but will in many cases have to be rolled back at a pace consistent with improving labour demand.
More generally, Going for Growth features a wealth of recommendations upon which OECD
governments can draw to strengthen the job content of the ongoing recovery. For the BRIICS, Going
for Growth priorities aim primarily at speeding up or maintaining ongoing convergence to OECD
living standards, and include interalia strengthening education systems, relaxing stringent product
market regulations and addressing the more specific challenges of labour market informality and –
in some cases– the quality of governance and legal systems.
Many of the structural reform recommendations we make in this edition of Going for Growth
could deliver double and even triple dividends in the current economic situation. They would
stimulate growth, which is their stated goal. They could also assist ongoing fiscal consolidation. This
is especially true of labour market reforms that would boost employment levels, as well as of cost-
saving public sector reforms. For instance, in a special chapter, we report new OECD analysis which
points to potential public spending savings from improving the efficiency of health care systems of
almost 2% of GDP on average across OECD countries. Furthermore, some of the structural reform
recommendations to individual OECD and non-OECD countries could contribute to reducing global
current account imbalances. Another special chapter on this issue suggests that a package of fiscal
consolidation and structural reforms may reduce global imbalances by about a third.
While reforms can help address the policy challenges of the post-crisis world, they are also
needed to ensure that past mistakes are not repeated and the risk of future crises is dramatically
reduced. This requires enhancing not only financial market regulation but also the functioning of
housing markets, where misguided policy interventions have magnified the crisis. In that regard, the
main findings from our special chapter are clear: there is much room for housing market reform in
many OECD countries, and better housing policies could deliver more efficient and equitable housing
outcomes, increase geographical mobility and improve macroeconomic stability going forward. It is
not too late to fix them.
Pier Carlo Padoan
Deputy Secretray-General and
Chief Economist, OECD
ECONOMIC POLICY REFORMS 2011: GOING FOR GROWTH © OECD 2011 5

TABLE OF CONTENTS
Table of Contents
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Part I
Structural Policy Priorities
Chapter 1. An Overview of Going for Growth Priorities in2011 . . . . . . . . . . . . . . . . . . . 17
Summary and conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Growth performance in OECD and BRIICS countries . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Policy reforms in the OECD and the BRIICS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Policy priorities to improve labour productivity performance . . . . . . . . . . . . . . . . . . 28
Policies to enhance labour utilisation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
The contribution of structural reforms to fiscal sustainability. . . . . . . . . . . . . . . . . . 37
Effects of structural reforms on current account imbalances. . . . . . . . . . . . . . . . . . . 44
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Annex 1.A1. How Policy Priorities are Chosen for Going for Growth. . . . . . . . . . . . . 52
Annex 1.A2. Structural Policy Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Annex 1.A3. Incorporating Household Production Into International
Comparisons of Material Well-Being . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Chapter 2. Country Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Chapter 3. Structural Policies Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Part II
Thematic Studies
Chapter 4. Housing and the Economy: Policies forRenovation. . . . . . . . . . . . . . . . . . . . 181
Summary and conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
Housing policies and recent housing market developments . . . . . . . . . . . . . . . . . . . 185
Housing policies, residential mobility and labour market dynamism. . . . . . . . . . . . 189
Efficient and equitable policy interventions in housing markets. . . . . . . . . . . . . . . . 194
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
Chapter 5. Tackling Current Account Imbalances: Is there a Role
for Structural Policies?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Summary and conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206
Introduction: recent trends in current account imbalances . . . . . . . . . . . . . . . . . . . . 207
ECONOMIC POLICY REFORMS 2011: GOING FOR GROWTH © OECD 2011 7
TABLE OF CONTENTS
How do structural policy reforms influence saving and investment?. . . . . . . . . . . . 209
How far can fiscal tightening and structural reforms contribute
to reduce global imbalances?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219
Chapter 6. A New Look at OECD Health Care Systems: Typology, Efficiency
andPolicies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
Summary and conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
Trends in health care outcomes and spending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
Efficiency gains could be large and reaping them would support
fiscal consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
A new typology of health care systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
There is no superior health care system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
Key policy messages for improving health system efficiency. . . . . . . . . . . . . . . . . . . 234
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236
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