Expand / Collapse Hide / Show all Abstracts Table of Contents

• Mark
• • PDF
  • READ
  Assessment and Recommendations

  After having stagnated during the past five years, the Dutch economy finally appears to have begun to recover. Substantial progress has been made towards correcting the financial imbalances that contributed to the downturn. Furthermore, major labour market, social benefit and health care reforms are underway to enhance labour utilisation and labour productivity. At the same time, cost competitiveness is being gradually restored. Barring further international energy price spikes, the Dutch economy should grow above trend in 2006, turning the page on one of the worst periods of stagnation since the 1930s. Even so, the economy remains vulnerable in the face of adverse shocks.

• • PDF
  • READ
  Challenges Faced by the Dutch Economy
  The Dutch economy is finally recovering, after having stagnated since the start of the decade. This first part of this chapter analyses the forces that are driving the present recovery, notably the progress made towards correcting the imbalances that caused the stagnation. It then discusses, based on detailed empirical evidence, why it took longer to return to trend growth in the Netherlands than in some other OECD countries – in other words, why the Dutch economy lacks resilience. The second part of this chapter gives an overview of medium-term challenges that will become increasingly important in the future: how to make the path of public finances sustainable in a context of population ageing; how to better utilise potential labour resources; how to boost productivity growth, in particular in the services sectors; and how to stimulate innovation activity so as to boost potential output growth.
• • PDF
  • READ
  Putting Public Finances on a Sustainable Path
  This chapter discusses the fiscal challenges facing Dutch policymakers in the short and medium-term. After large budgetary overruns at the start of the decade, the Netherlands has successfully reined in the government deficit, thanks to a combination of expenditure restraint and revenue windfalls. The chapter discusses these short-term developments as well as the need to resist renewed pressures for spending increases and tax relief. It also discusses how the existing fiscal framework, which has generally functioned well, could be strengthened. Finally it reviews the medium-term budgetary trends, as the effects of population ageing loom large. It argues that the pension system, despite its many enviable features, would benefit from shifts in parameters like retirement age and replacement rate.
• • PDF
  • READ
  Labour Market Reform to Increase Resilience and Labour Utilisation
  This chapter discusses labour-market reforms to increase macroeconomic resilience and labour utilisation. Strict EPL on regular contracts and long unemployment benefit duration weaken re-equilibrating mechanisms that drive the economy back to trend. Regulations that make EPL strict on regular contracts are identified in the first part of the chapter, along with recent and planned reforms to ease EPL on such contracts and suggestions for further reforms. The need to sharpen incentives for unemployed persons to search for a job early in their unemployment spell is also touched upon. Concerning labour utilisation, the main weaknesses are in female working time and in the employment rate for older workers. Low female working time appears to be mainly attributable to difficulties that mothers have in reconciling family and work life. Childcare and out-of-school-hours care arrangements are being strengthened but more needs to be done. To encourage older workers to remain in the labour force longer, access to publicly subsidised routes to early retirement has progressively been made more difficult but there is still scope to go further, especially in respect of unemployment benefit. At the same time, more needs to be done to enhance the employability of older workers.
• • PDF
  • READ
  Further Improvement of Product Market Competition, Especially in Services
  This chapter discusses options for further product market reform, especially in services, so as to increase productivity growth. It identifies the main regulatory barriers to product market competition based notably on the OECD Product Market Regulation database. Reducing the barriers to entrepreneurship prevailing in the Netherlands – in particular, the licence and permit procedures – and preventing distortions from state control are important to foster competition and productivity growth. The chapter notably sheds light on the barriers in the distribution and finance sectors, which appear to have hindered the profitable use of ICT in these sectors. Competition seems to be weak in the Dutch retail sector due to strict regulations that limit entry of (large) stores and restrict shop opening hours. As well, the lack of integration of the retail financial market across the European Union seems to be an important obstacle to productivity growth in the financial sector.
• • PDF
  • READ
  Making Better Use of Knowledge Creation in Innovation Activities
  This chapter discusses priorities for strengthening innovation in the Netherlands. The main weaknesses are in business R&D intensity, the share of the population with tertiary education, and in commercially applying new knowledge. About 60% of the shortfall in the business R&D intensity relative to the OECD average is linked to the specialisation of the Dutch economy in R&D extensive sectors. The remaining 40% can be explained by a number of factors, including low R&D intensity of inward FDI. Strengthening co-operation between public research organisations and innovating firms, rationalising support for innovation and increasing both the current and prospective supply of scientists and engineers would help to make the Netherlands a more attractive location for R&D investments. Factors that weigh down tertiary education attainment appear to be, the absence of shorter (2-year) courses especially at a tertiary vocational level, and inadequate incentives for institutions to attract students. The authorities are considering introducing shorter tertiary courses and are experimenting with greater competition among tertiary education suppliers for public funds. Barriers to entrepreneurship contribute to the weak performance in commercially applying new knowledge. The government is encouraging entrepreneurship, notably through education campaigns and reform of bankruptcy laws, but more should be done to strengthen incentives for entrepreneurship.
• Add to Marked List