OECD Economics Department Working Papers

ISSN :
1815-1973 (online)
DOI :
10.1787/18151973
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

 

The Impact of Structural Policies on Saving, Investment and Current Accounts You or your institution have access to this content

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Author(s):
Clovis Kerdrain1, Isabell Koske1, Isabelle Wanner1
Author Affiliations
  • 1: OECD, France

Publication Date
02 Dec 2010
Bibliographic information
No.:
815
Pages
70
DOI
10.1787/5km398ttzlkg-en

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This paper explores the impact of structural policies on saving, investment, and current accounts in OECD and non-OECD economies. Since the current account effects of structural reforms are often complex and ambiguous from a theoretical perspective, new OECD empirical analysis is carried out. Reduced-form equations are estimated for a panel of 30 OECD countries as well as for a panel/cross-section of 117 OECD and non-OECD countries that relate saving, investment and current accounts to policy indicators and a set of macroeconomic control variables. This work suggests that structural reforms may influence saving, investment and current accounts through their impact on macroeconomic conditions such as productivity growth or public revenues and expenditures, but also more directly: i) higher social spending (in particular on health care) is found to lower the saving rate and thereby to weaken the current account, most likely reflecting lower precautionary saving; ii) product market liberalisation temporarily boosts investment and thus also weakens the current account; iii) financial market deregulation may lower the saving rate, though only in less developed countries; iv) stricter employment protection may be associated with lower saving rates if unemployment benefits are low, as well as with higher investment rates possibly due to greater substitution of capital for labour. A scenario analysis indicates that fiscal consolidation and structural reforms in the main world economies could significantly reduce current global imbalances, possibly by about a third.
Keywords:
product market regulation, labour market regulation, social welfare system, current account, financial market regulation, taxation, saving, investment
JEL Classification:
  • E21: Macroeconomics and Monetary Economics / Macroeconomics: Consumption, Saving, Production, Employment, and Investment / Consumption; Saving; Wealth
  • E22: Macroeconomics and Monetary Economics / Macroeconomics: Consumption, Saving, Production, Employment, and Investment / Capital; Investment; Capacity
  • F41: International Economics / Macroeconomic Aspects of International Trade and Finance / Open Economy Macroeconomics
  • G18: Financial Economics / General Financial Markets / Government Policy and Regulation
  • H23: Public Economics / Taxation, Subsidies, and Revenue / Externalities; Redistributive Effects; Environmental Taxes and Subsidies
  • H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions
  • K20: Law and Economics / Regulation and Business Law / General
  • K31: Law and Economics / Other Substantive Areas of Law / Labor Law