06 Aug 2002
Income Distribution and Poverty in the OECD Area
This article uses internationally-comparable data on the distribution of income across households to identify some well-founded facts to replace the conjecture and supposition which too often dominate discussions on inequality and poverty. There has been a general trend in nearly all OECD countries towards increased market income (earnings and income from capital) inequality between the mid-1970s and the mid-1990s. However, in a significant minority of countries this has not resulted in higher levels of inequality because either the amounts distributed through the tax and transfer system have increased, or because it has become more progressive. Changes in income distribution in the past ten years generally favoured the prime-age and elderly age groups, particularly those around retirement age. Relative income levels of single parents are very low and have worsened in a number of countries. Trends in earned income, and in particular trends in employment, are found to be crucial in explaining these changes.
06 Aug 2002
Investment in human capital through upper-secondary and tertiary education
This article examines various efficiency and equity aspects related to the skill acquisition of young people and older adults. The analysis suggests that human capital investment is associated with significant labour-market gains for individuals, including higher post-tax earnings and better employment prospects, which exceed the investment costs, mainly foregone earnings and tuition fees, by a significant margin. It also shows that the net benefits are strongly influenced by policy related factors, such as study length, tuition subsidies and student support. Overall, the estimates reported in the article indicate that there are strong incentives for the average student to continue studying beyond the compulsory schooling age, and also point to the benefits of such investment in education for society as a whole. However, the net gains fall with age, mainly reflecting a shorter period to take advantage of the benefits that come with education. Finally, the article notes that students in higher education tend to come from more affluent backgrounds and that they benefit from large public subsidies, whereas young people from disadvantaged backgrounds are less likely to participate in tertiary education and thus benefit from public subsidies.
06 Aug 2002
Tax systems in European Union countries
Despite recent cuts, the tax-to-GDP ratio in most EU countries remains much higher than in other economies. The tax mix is also different, with high tax wedges on labour and a stronger reliance on consumption and environmentally related taxes. While there is not much room for cutting taxes significantly without downsizing public spending, further re-balancing the tax burden away from labour could contribute to better employment performance. Greater reliance on property taxes, which are low by international standards, less use of reduced VAT rates and tax incentives targeted to specific saving vehicles should be considered. EU countries’ experience in reforming their tax system may also provide useful insights for other regions where international integration is deepening. The free movement of goods, people and capital within the EU area, combined with the advent of the single currency, has also affected the design of national tax systems and has brought to the fore a number of international taxation issues.
06 Aug 2002
The contribution of information and communication technologies to economic growth in nine OECD countries
This paper compares the impact of ICT capital accumulation on output growth in Australia, Canada, Finland, France, Germany, Italy, Japan, the United Kingdom and the United States. The analysis uses a growth accounting framework and a newly compiled database of investment in ICT equipment and software based on the System of National Accounts 1993 (SNA93). It is found that over the past two decades, ICT contributed between 0.2 and 0.5 percentage point per year to economic growth, depending on the country. During the second half of the 1990s, this contribution rose to 0.3 to 0.9 percentage point per year.
06 Aug 2002
Estimation of the Cyclical Behaviour of Mark-ups
This paper presents estimates of the cyclical fluctuations of price-cost margins, following an extended version of the Rotemberg and Woodford (1991) approach. The results support the hypothesis of counter-cyclical price margins in most manufacturing industries, especially in the presence of downward rigidities of labour inputs. This is consistent with a growing body of empirical literature showing that economic booms tend to increase competition or decrease the incentives for collusion, thereby creating downward pressures on price margins. It also offers an appealing interpretation of the otherwise puzzling pro-cyclicality of real wages.