Browse by: "2015"

This paper analyses the characteristics of firms that operate at the global productivity frontier and their relationship with other firms in the economy, focusing on the diffusion of global productivity gains and the policies that faciliate it. Firms at the global productivity frontier – defined as the most productive firms in each two-digit industry across 23 countries – are typically larger, more profitable, younger and more likely to patent and be part of a multinational group than other firms. Despite the slowdown in aggregate productivity, productivity growth at the global frontier remained robust over the 2000s. At the same time, the rising productivity gap between the global frontier and other firms raises key questions about why seemingly non-rival technologies do not diffuse to all firms. The analysis reveals a highly uneven process of technological diffusion, which is consistent with a model whereby global frontier technologies only diffuse to laggards once they are adapted to country-specific circumstances by the most productive firms within each country (i.e. national frontier firms). This motivates an analysis of the sources of differences in the productivity and size of national frontier firms vis-à-vis the global frontier and the catch-up of laggard firms to the national productivity frontier. Econometric analysis suggests that well-designed framework policies can aid productivity diffusion by sharpening firms’ incentives for technological adoption and by promoting a market environment that reallocates resources to the most productive firms. There is also a role for R&D tax incentives, business-university R&D collaboration and patent protection but trade-offs emerge which can inform the design of innovation-specific policies.

The issue of cultural bias in subjective well-being data is often raised, but rarely well-documented. This paper reviews the main barriers to interpreting national differences in subjective well-being, noting the challenge of distinguishing between cultural bias (understood as measurement error) and cultural impact (where culture plays a more substantive role in shaping how people experience their lives). Several methods are then used to attempt to quantify the role of culture in subjective well-being, drawing on multiple waves of the Gallup World Poll, conducted in over 150 countries and territories. Regression analysis is used to identify country-specific fixed effects, which capture unexplained variance in subjective well-being at the country level, over and above a basic set of socio-economic and demographic controls. These country fixed effects then become the subject of three further investigations. The first examines whether survey measures of “cultural values” are able to explain the size and direction of country fixed effects; the second considers the evidence for international differences in “appraisal styles” (e.g. a more positive or negative outlook on life in general); and the third explores the “cultural transmission” of subjective well-being, focusing on the experiences of migrants to separate the effects of culture from those of broader life circumstances. The paper shows that, although life circumstances explain well the overall pattern of cross-country variation in subjective well-being, a gap is observed for some countries. Culture may account for some 20% of the country-specific unexplained variance. This combined effect of “cultural impact” and “cultural bias” is small when compared to the role of objective life circumstances in explaining subjective well-being outcomes.

This paper presents the Measurement Framework of the OECD Inclusive Growth Initiative, a horizontal project that the OECD launched in 2012 to develop a new vision of economic growth that can translate in higher living standards for all. This measurement framework builds on the equivalent income approach to develop an indicator of Multidimensional Living Standards (MDLS) that combines monetary (income) and non-monetary (health and jobs) benefits from economic growth and aggregates them across individuals with different characteristics. The paper discusses estimates of MDLS for 29 OECD countries and China in the period 1995-2012. It finds that between 1995 and 2007 living standards of the median household have increased in all countries under study and have gone up the most in countries where they were initially lower. The convergence in living standards has been driven by convergence in all underlying dimensions, namely income, unemployment and to a lesser extent, longevity. Between 2007 and 2012 living standards of median households hardly grew and several countries witnessed receding living standards. The bulk of the loss is explained by rising unemployment, while median household income growth has remained broadly stable.

All OECD countries are faced with substantial inequalities in health status between socioeconomic groups within their populations. One aspect of these inequalities for which data are routinely available in many countries is inequalities in mortality by level of education: people with a lower level of education typically have considerably higher death rates and lower life expectancy than people with a higher level of education. The OECD recently started a project to generate measures of the distributions of ages at death by educational level, gender and cause of death for as many countries as possible. This working paper aims to highlight the most important methodological issues to be faced when trying to create valid statistics on mortality by level of education, and to highlight how different methodologies may affect results and comparisons. Topics covered include study designs (e.g. use of cross-sectional census-unlinked versus longitudinal census-linked data), data harmonization issues (e.g. use of a common educational classification scheme), and data analysis issues (e.g. choice of a summary measure of inequalities in mortality). The paper ends with a number of recommendations for data analysts.

Parties to the UN Framework Convention on Climate Change (UNFCCC) are currently negotiating a climate change agreement scheduled for adoption at the 21st Conference of the Parties in December 2015. At the centre of the new agreement are nationally determined contributions (NDCs). These are the objectives and actions relating to mitigation or other aspects of climate change responses that countries are willing to put forward internationally and be bound by in some way. This paper seeks to clarify and discuss ideas contained in the draft agreement and draft decision text for the 2015 agreement that may serve to enhance the dynamism and ambition of nationally determined mitigation contributions or commitments (NDMCs). Provisions for ambition and dynamism are included in the procedures framing NDMCs, namely common, regular communications and the requirement that NDMCs become more ambitious over time. Several multilateral processes are also proposed, which might influence the ambition of NDMCs in terms of their content and implementation. The paper discusses proposals for a clarification exercise, a regular global stocktake, and individual assessment and review processes contained with the transparency system and a potential facilitative compliance and implementation system. There are implementation challenges associated with all proposals, though overall these could encourage countries to maximise effort, and provide an opportunity for countries to revise and update their contributions and commitments at regular intervals.

There are many reasons why the United Nations Framework Convention on Climate Change (UNFCCC) reporting framework requests information from countries. These include understanding and tracking progress with individual or collective commitments or pledges, providing confidence and enhancing accountability in quantified information measured and reported, and providing background information on the scope and ambition of national climate responses. This paper highlights the gaps, inconsistencies and uncertainties in the current reporting framework, which was developed for both long-standing obligations and mitigation pledges for the period to 2020. The paper also identifies possible improvements in the UNFCCC reporting framework in the context of the post-2020 transparency framework and nationally determined contributions (NDCs) for the post-2020 period.

Livestock diseases can severely harm animal and human health, and have adverse economic impacts on producer incomes, markets, trade, and consumers. This paper develops a common framework to improve information on public actions and policies to manage outbreaks of livestock diseases across countries. The main aim is to facilitate the assessment of the effectiveness and efficiency of different policy responses to disease outbreaks. A pilot database covering four livestock diseases (avian influenza, bovine spongiform encephalopathy, classical swine fever, and foot and mouth disease) in nine countries (Canada, Denmark, France, Germany, Hungary, Japan, Mexico, the Netherlands, and the United Kingdom) was constructed. It combines three layers of data: epidemiological factors; government control and compensation measures; and economic impacts of disease outbreaks. Policy responses to outbreaks were reviewed based on the information generated from the data analysis. The results show that government expenditures to destroy pathogens via slaughter and compensation policy measures were very expensive, especially in the case of large or prolonged outbreaks, and that measures compensating financial losses at the farm level generated the highest share of government expenditures in the short run.

Open science commonly refers to efforts to make the output of publicly funded research more widely accessible in digital format to the scientific community, the business sector, or society more generally. Open science is the encounter between the age-old tradition of openness in science and the tools of information and communications technologies (ICTs) that have reshaped the scientific enterprise and require a critical look from policy makers seeking to promote long-term research as well as innovation.

The main objective of this study is to offer an overall picture of support by multilateral and bilateral development partners to development country infrastructure. By presenting an overview of the scale, distribution, and modality of development co-operation for infrastructure, the report is expected to contribute to discussions and further research in international fora on how to fill the financing gap, particularly by mobilising the private sector. However, the report does not generally make assessments against development objectives nor provide policy recommendations. The methodology mainly involved analysing the OECD Development Assistance Committee (DAC)’s Creditor Reporting System data on Official Development Finance (ODF) for the infrastructure sectors (water and sanitation, transport, energy, and communications). Desk research was also conducted on gaps in infrastructure financing as well as support by major development partners that do not report to the DAC at the activity level.

On average across OECD countries, students’ belief that they can solve mathematics problems (mathematics self-efficacy) is associated with a difference of 49 score points in mathematics – the equivalent of one year of school. There is a strong connection between how confident students feel about being able to solve pure and applied mathematics problems, and whether or not they were exposed to similar problems in class. When comparing students with similar academic performance and socio-economic status, those whose parents expected that they would enter university generally reported greater mathematics self-efficacy than those whose parents did not hold such high expectations for them.

En moyenne, dans les pays de l’OCDE, la confiance des élèves en leur capacité à résoudre des problèmes de mathématiques (leur efficacité perçue en mathématiques) est associée à une différence de 49 points de score dans cette matière – soit l’équivalent d’une année de scolarité. Il existe une corrélation étroite entre d’un côté, la confiance des élèves en leur capacité à résoudre des problèmes de mathématiques pures et appliquées, et de l’autre, le fait qu’ils aient déjà été exposés ou non à des tâches similaires en classe. Lorsque l’on compare des élèves présentant des résultats scolaires et un niveau socio-économique similaires, ceux dont les parents aspirent à ce qu’ils suivent des études supérieures font généralement part d’un niveau plus élevé d’efficacité perçue en mathématiques que ceux dont les parents ne nourrissent pas des attentes aussi élevées à leur égard.

This work proposes a task-based methodology for the measurement of employment and investment in organisational capital (OC) in 20 OECD countries. It builds on the methodology of Squicciarini and Le Mouel (2012) and uses information from the OECD Programme for the International Assessment of Adult Competencies (PIAAC). OC is defined as firm-specific organisational knowledge resulting from the performance of tasks affecting the long-term functioning of firms, such as developing objectives and strategies; organising, planning and supervising production; and managing human resources. Cross-country heterogeneity in OC-related occupations emerges: while 20 occupational classes of the International Standard Classification of Occupations (ISCO 2008) are on average identified as being OC-related, country-specific values range between 14 (in Korea) and 24 occupations (in Poland). A core group of managerial occupations are consistently identified as OC occupations across countries, whereas differences arise in the selection of professionals and associate professionals in science and engineering, health, education, and business administration. Estimates suggest the share of OC occupations in total employment to amount to 16% on average, with country-specific values that vary between 9.5% (Denmark) and 26% (United Kingdom); and that total investment in OC, as a share of value-added, ranges from 1.4% in the Czech Republic to 3.7% in the United Kingdom, with an average 2.2% across all countries. Managers appear to account for less than half of total employment and investment in OC. Total investment in OC results higher in services than in manufacturing. In the services sector, on average half of investment in OC comes from small firms, while in manufacturing, 45% of investment in OC comes from large firms. Finally, the importance of OC investment in the public sector is investigated. With only few exceptions, investment in OC is higher in the public sector than in the private sector. These estimates of OC investment can be used to analyse its role with respect to skill use and mismatch, its impact on the routinisation of tasks and resulting polarisation of wage distribution, and its role in firms' integration and upgrading along global value chains (GVC).

The present work proposes a novel methodology for the measurement of investment in human capital in the form of training. Differently from existing studies, the expenditures-based approach pursued encompasses investment in formal and on-the-job training, as well as in informal learning and yields estimates that account for both the opportunity and the direct cost of the different forms of training considered. Using a wide array of data sources, including new and rich individual-level data collected through the OECD Programme for the International Assessment of Adult Competencies (PIAAC) survey as well as Labour Force Surveys (LFS) and System of National Accounts (SNA) data, the study proposes estimates of investment in training for the years 2011-2012. These cover 22 OECD countries and are provided at both the economy and industry levels. Estimates suggest that average total investment in training corresponds to 6.7% of gross value added (GVA), with investment in on-the-job training (amounting to 2.4% of GVA, on average) that are substantially in line with those of previous literature. Wide sector and country heterogeneity in the relative importance of investment in formal and on-the-job and informal learning also emerge. On average, production appears more intensive in on-the-job training (relative to other training types) than overall services, but not relative to business services only. Public-oriented services such as education and health services invest a greater (smaller) proportion of total training expenditure in formal (on-the-job) training than other sectors and the overall economy.

In recent years, China has seen an unprecedented expansion of health insurance for its population in its quest to achieve universal health coverage. By 2011, 95% of the Chinese population was insured up from less than 50% in 2005 through public or employer-based insurance schemes. As part of this move, the structure of health care financing has shifted significantly, such that public sources in 2013 funded well over half of all health spending, compared with just over a third in the early 2000s. In that context, it is important to determine the main drivers of future growth in health spending in the medium term, to assess the possible impact on public budgets. Using a component-based health expenditure model developed at the OECD, future projections of public spending on health care and long-term care are made for OECD and key emerging economies, including China. The uniform cross-country framework allows for consistent international comparisons under different cost-pressure and cost-containment scenarios.

Using the Survey of Adult Skills (PIAAC), this paper documents how the returns to education and skill change with experience for a sample of 22 OECD countries. It does this within the framework of the Altonji and Pierret (2001) employer learning model, and therefore also tests the relevance of this theory in a wide range of countries using comparable data and a consistent methodology. Significant heterogeneity is found in the experience profiles of the returns to education and skill across countries, and convincing evidence in support of the employer learning theory is only found in a sub-set of the countries analysed. While these countries vary significantly from one another in terms of their labour market institutions and educational systems, the analysis does seem to suggest that employer learning is most common in those countries where employment protection legislation on temporary contracts is weak. This is consistent with a model in which temporary contracts allow employers to test and learn about young workers, and give them the flexibility to adjust wages in line with observed productivity.

JEL codes: J24, J32, D83
Keywords: Employer learning, returns to education, returns to skill

This paper presents long-term trade scenarios for the world economy up to 2060 based on a modelling approach that combines aggregate growth projections for the world with a detailed computable general equilibrium sectoral trade model. The analysis suggests that over the next 50 years, the geographical centre of trade will continue to shift from OECD to non-OECD regions reflecting faster growth in non-OECD countries. The relative importance of different regions in specific export markets is set to change markedly over the next half century with emerging economies gaining export shares in manufacturing and services. Trade liberalisation, including gradual removal of tariffs, regulatory barriers in services and agricultural support, as well as a reduction in transaction costs on goods, could increase global trade and GDP over the next 50 years. Specific scenarios of regional liberalisation among a core group of OECD countries or partial multilateral liberalisation could, respectively, raise trade by 4% and 15% and GDP by 0.6% and 2.8% by 2060 relative to the status quo. Finally, the model highlights that investment in education has an influence on trade and high-skill specialisation patterns over the coming decades. Slower educational upgrading in key emerging economies than expected in the baseline scenario could reduce world exports by 2% by 2060. Lower up-skilling in emerging economies would also slow down the restructuring towards higher value-added activities in these emerging economies.

JEL classification codes: E23, E27, F02, F17, F47
Keywords: General equilibrium trade model, long-term trade and specialisation patterns, trade liberalisation

This paper studies the cyclical behaviour of public social spending in 20 OECD countries observed over the period between 1982 and 2011. In view of the recent discussion on cutting the budget deficit, the paper pays particular attention to whether social spending is pro-cyclical or countercyclical, whether it changes asymmetrically during expansions and recessions and whether the asymmetric changes in social spending contribute to a drift in social expenditures over time. The links between social spending levels and key economic variables, such as economic growth, provide also a useful context for discussing current social expenditure trends. The estimates, based on a system-GMM estimator, suggest that an upward ratchet effect exists. The effect is robust to a large number of alternative specifications.

JEL classification: E32, E62, H50, I00
Keywords: Fiscal policy, economic cycles, social spending, ratchet effect