OECD Economic Surveys: Canada

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1999-0081 (en ligne)
1995-302X (imprimé)
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OECD’s periodic surveys of the Canadian economy. Each edition surveys the major challenges faced by the country, evaluates the short-term outlook, and makes specific policy recommendations. Special chapters take a more detailed look at specific challenges. Extensive statistical information is included in charts and graphs.

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OECD Economic Surveys: Canada 2006

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31 jui 2006
Pages :
9789264025264 (PDF) ;9789264025257(imprimé)

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This 2006 edition of OECD's periodic survey of Canada's economy finds strong economic performance but cautions that to maintain this performance, productivity must be increased and social policies must be put on a sustainable path.  After reviewing recent economic developments, the Survey examines the business environment including taxation, product market competition, and capital markets.  It then takes a look at the state of innovation, Canada's innovation strategy, and how to leverage innovation to improve economic performance.  A chapter on fiscal policy and federal-provincial arrangements finds equalisation transfers need to be revamped and that the federal government should step back from trying to steer in areas of provincial responsibility.  The final chapter takes a detailed look at social welfare programmes.
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  • Assessment and Recommendations
    The Canadian economy has continued to deliver excellent results in nearly all respects. Output and employment growth have been robust, while the unemployment rate has fallen to its lowest level since 1974. Inflation remains comfortably under control, and the general government and current account balances are in surplus. Altogether, Canadians enjoy one of the highest living standards in the OECD, a result that reflects the pay-off from good macroeconomic management and the structural reforms put in place. But despite all these positive dimensions, hourly productivity growth in the business sector has been weak in recent years, although it showed a sharp pick-up in 2005.
  • Managing the Challenges ahead
    The Canadian economy has performed well in recent years, and its per capita GDP gap with the United States has been narrowing, once adjustment is made for terms-of-trade gains. However, a number of challenges lie ahead. Rapid population ageing is expected to affect the size of the workforce and weigh on public finances through a surge of elderly and health care spending. Improving productivity performance will be crucial to achieving durable prosperity gains, given the nation’s already high employment rates. In addition, it will be important to ensure that the federal and provincial fiscal arrangements, as well as social policies, are on a sustainable path.
  • Improving the Business Environment
    This chapter considers policies affecting the business environment in Canada and examines how the federal, provincial and territorial governments could move towards establishing a more level playing field where firms can compete against one another and in the global environment by making the most of market opportunities. A number of issues need to be tackled. High marginal effective tax rates on capital reduce new investment and also lead to a misallocation of resources. Product market competition would be invigorated by liberalising electricity markets; lifting foreign direct investment restrictions in telecommunications, broadcasting and transport; dismantling inter-provincial barriers in services; and scaling back occupational licensing. Agricultural supply management systems should be replaced by open markets and industrial subsidies should be minimised. The cross-subsidy component of unemployment insurance needs to be addressed. Regulation of banking and securities ought to focus on building deeper, integrated markets by allowing consolidation to take place, by ensuring effective competition from foreign bank entry and by achieving a single securities market.
  • Innovation and Economic Performance
    Innovation plays a key role in economic progress and lifting living standards. The most critical factor in encouraging innovation is getting the framework conditions right so that businesses can flourish. This chapter concentrates on the more specific aspects of innovation in Canada to identify where policies could be improved. It first reviews Canada’s performance on innovation, which is relatively good on product innovation but weaker on processes. The country’s innovation strategy focuses on knowledge, skills, the innovation environment and community-based innovation. Public R&D needs to be governed by an integrated strategy, while generous tax credits for business R&D should be re-examined. More attention is being paid to commercialisation of R&D. A skilled and talented workforce helps to diffuse innovation through the economy, but while Canada has enough scientists to meet current demand, it lacks people with management, marketing and other business skills. Diffusion would also be aided by lifting general literacy and life skill levels. Well-designed co-financing arrangements would encourage participation in adult education and training. Lastly, the venture capital market would perform better if the tax advantage provided to Labour-Sponsored Venture Capital corporations were removed.
  • Adapting Fiscal Policy and Financial Arrangements in the Federation
    This chapter examines the sustainability of financial arrangements within the Canadian federation. Fiscal performance is currently amongst the best in the OECD countries, but some refinements to the fiscal framework both at the federal and provincial levels may be helpful to prepare the economy to cope better with the long-term challenges of rising spending on health and long-term care. In addition, long-term projections at the general government level will help to verify whether current policies are consistent with Canada’s future needs. The federation has thus far achieved its goal of ensuring provinces have sufficient revenues to deliver similar public services at comparable levels of taxation. However, existing federal-provincial arrangements may not be sustainable over the medium run. Streamlining the system of transfers, as well as strengthening the accountability of the various levels of governments, would be beneficial. Moreover, the present equalisation system needs to be adapted to structural changes underway and the growing importance of the energy sector.
  • Social Policies
    This chapter reviews recent changes that have been introduced to improve the welfare mix of social policies in Canada and suggests further adjustments to raise their efficiency. Family policies need to be redesigned to lower the disincentives to work they currently embody, particularly for low-income earners. Social programmes need to shift their focus from short-term intervention to high quality skill-upgrading. Social and economic inclusion of the Aboriginal population and recent immigrants could be accelerated by tailored measures, while programmes for disadvantaged children and at-risk families could be further developed. Access to early education and childcare services could be facilitated for young children and especially, low-income families. As the population ages, making it easier for older workers to remain in the labour force will also be beneficial.
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