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This paper proposes a novel wavelet-based approach for constructing composite indicators. The wavelet-based methodology exploits the ability of wavelet analysis to analyse the relationships between variables on a scale-by-scale, rather than aggregate, basis. A wavelet-based index which combines several scale-based subindexes is constructed by using a scale-by-scale selection of the components included in the OECD composite leading indicator (CLI) for the US. The comparison with the CLI and its derived measures indicate that the wavelet-based composite index tends to provide early signals of business cycle turning points well in advance of the OECD CLI. Moreover we find that the reliability of the signals tends to increase considerably when the sub-index obtained from the time scale components corresponding to minor cycles, that is, 2-4 years, is removed from the overall wavelet-based index.

Keywords: wavelets; composite leading indicators; early warning signals
JEL classification: C1; C3; C5; E3

This paper addresses the current and emerging uses and impacts of robots, the mid-term future of robotics and the role of policy. Progress in robotics will help to make life easier, richer and healthier. Wider robot use will help raise labour productivity. As science and engineering progress, robots will become more central to crisis response, from helping combat infectious diseases to maintaining critical infrastructure. Governments can accelerate and orient the development and uptake of socially valuable robots, for instance by: supporting cross-disciplinary R&D, facilitating research commercialisation, helping small and medium-size enterprises (SMEs) understand the opportunities for investment in robots, supporting platforms that highlight robot solutions in healthcare and other sectors, embedding robotics engineering in high school curricula, tailoring training for workers with vocational-level mechanical skills, supporting data development useful to robotics, ensuring flexible regulation conducive to innovation, strengthening digital connectivity, and raising awareness of the importance of robotics.

Digital technologies are transforming the environment in which firms compete online. While this change has delivered wide-reaching benefits for consumers, it has also given rise to potential competition concerns. One such area of concern relates to conglomerate mergers, which occur between firms that are neither product market competitors nor in a supply relationship. This Going Digital Toolkit note describes how merger control, and in particular the review of conglomerate mergers, can be an effective tool for making online markets more competitive.

The paper presents a critical discussion of ex-post impact evaluation of policies that affect regional economic development, with a particular emphasis on drawing useful implications for policy making. In particular, it discusses the importance of setting clear and measurable objectives in designing policies and the need for equally clear policy levers; it highlights the main advantages of “counterfactual” evaluation; it analyses the methodological specificities of the evaluation of programmes that have a regional or urban dimension; and it provides a survey of some of the most relevant examples in the empirical economics literature.
The ultimate goal is to “bridge” the perceived distance between policy discussions on the one side, and academic debates on the other. Some specific recommendations conclude the report.

Across the euro area, the ability of public finances to support equitable growth has tended to deteriorate. Concerns about high and rising public debt, together with market pressure in some cases, led to sharp fiscal consolidation in 2011-13, against the backdrop of a weak economic situation at the time, which is considered to have made the recession deeper and longer. Consolidation has slowed down afterwards, but countries with fiscal space have made limited use of the leeway allowed under EU fiscal rules to support euro area aggregate demand. The expenditure composition has generally become less growth-friendly, with large cuts in public investment. On the revenue side, already high taxes on labour have tended to increase further. Structural reforms with direct positive implications for the composition or efficiency of public finances have stalled. While most policy levers to improve public finances remain at the country level, European and national policies can be mutually reinforcing in fiscal governance and public investment. To achieve a euro area fiscal stance that fosters the recovery, countries with fiscal space under the Stability and Growth Pact rules should use budgetary support to raise growth, and existing incentives and flexibility should be taken advantage of to pursue reforms of tax and spending policies. At the national level, it is essential to further upgrade budgetary frameworks, including through the adoption of expenditure rules and regular performance of spending reviews. To promote capital formation and make it more effective, EU budget resources for investment should be deployed in a way to crowd in national public funds and private financing, and foster greater investment productivity. At the national level, better coordination of investment across levels of government and upgraded administrative capacity would increase investment efficiency. This Working Paper relates to the 2016 OECD Economic Survey of the euro area (www.oecd.org/eco/surveys/economic-survey-european-union-and-euro-area.htm)

This paper provides a snapshot of the development of renewable energies in the European Union Outermost Regions (EU ORs), focusing on their potential to contribute to the green transition while creating sustainable economic development opportunities. It reviews the policy frameworks and tools in place in EU ORs with respect to renewable energies, and provides specific policy recommendations. The paper is developed within the framework of the EU-OECD project on Global Outermost Regions.

French

This paper looks at the importance of mechanisms that give formal recognition to vocational skills acquired through work-based learning and how such mechanisms might be developed. It describes how skill recognition can benefit individuals, employers and society as a whole, and identifies in which contexts skill recognition has the highest potential to bring benefits. The focus is on three tools that are commonly used to shorten the path to a formal qualification: admission into a programme, reduced programme duration and qualification without a mandatory programme. For each of these tools, this paper sets out country approaches, discusses common challenges that arise in their implementation and advances policy messages to support policy design and implementation.

Dutch banks were put under heavy strains early in the global downturn and have comparatively weak financial buffers to cope with new shocks. Falling house prices have increased the share of households with negative home equity to nearly 35% for home-owning households and 40% for mortgage holders. Even though defaults have so far been limited, mortgage amortisation is low and risks are concentrated among younger borrowers who often do not have sufficient resources to cope with adverse shocks. Banks are very large relative to the size of the domestic economy, have sizeable cross-border exposures and rely significantly on wholesale funding. Resolution procedures should be strengthened to reduce the potential cost for the taxpayer and the regulator’s tools available to reduce risks should be expanded. In particular, banks should set aside sufficient provisions for expected losses and problem loans, which requires some harmonisation of the definition of non-performing loans across banks. Higher capital buffers would bolster financial stability and help ensure access to market funding while lowering its cost. Welcome measures have been taken to encourage household deleveraging, but deeper and broader steps are needed to bolster financial stability and improve consumer protection when the housing market starts to recover durably and over the medium term. The stock of existing mortgages should be gradually converted into amortising mortgages, the cap on the loanto- value ratio reduced significantly below 100% and housing subsidies to homeownership cut more decisively. This Working Paper relates to the 2014 OECD Economic Survey of the Netherlands (www.oecd.org/eco/surveys/economic-survey-netherlands.htm).
Since around 2007, the country has been enjoying an “energy renaissance” thanks to its abundant stocks of shale oil and gas. The resurgence in oil and gas production is beginning to create discernible economic impacts and has changed the landscape for natural gas prices in the United States, boosting competitiveness. In order to reap the benefits fully, significant investment is needed. Federal and state governments capture some of the resource rents, but there are potential opportunities to increase taxation and use the revenues to support future well-being. Taxing natural resource rents with profit taxes can be less distortionary than other forms of taxation, though only one state uses this form of tax. Production of shale resources, like other forms of resource extraction, poses a number of challenges for the environment. Respecting demands on water resources requires adequate water rights are in place while state and federal regulators need to monitor the environmental impact of hydraulic fracturing closely and strengthen regulations as needed. Natural gas is a potential “bridge fuel” towards a lower carbon economy, helping to reduce emissions by leading to a substitution away from coal. Flanking measures are desirable to counter natural gas hindering renewables and low prices stymieing innovation. This Working Paper relates to the 2014 OECD Economic Survey of United States (www.oecd.org/eco/surveys/United States).
The Dutch occupational pension system has been successful in securing high asset accumulation to fund generous pension promises. However, for the second time in this decade the pension system has been affected by a financial crisis and many pension funds’ assets fell below levels needed to meet regulatory requirements. Insufficient funding raises solvency issues, which could eventually lead to large fiscal costs in case of bail-outs. In response to the crisis, most funds were required by the regulator to draw up recovery plans to restore their funding over five years. This has raised concerns that the adjustment required by the regulator is unnecessarily sharp, with possibly adverse macroeconomic implications. On the other hand, OECD simulations indicate that under current policies, it is unlikely that funding rates will be secured that enable the funds over the long term to fulfil their promises of a replacement rate of up to 80% of average wages. This raises the challenge of implementing parametric changes that secure pension benefits without large detrimental effects on intergenerational equity and growth. Occupational pensions are transferable, which enhances labour market mobility. But it is often very difficult for workers to assess how one pension scheme compares to another, posing practical barriers to mobility that should be eased. This Working Paper relates to the 2010 OECD Economic Survey of the Netherlands (www.oecd.org/eco/surveys/ netherlands).
Housing plays a key role in the economy, because of its weight in household expenditures and assets, its importance for social well-being, and its impact on educational outcomes and employment as well as on the business cycle. Over the past half century, the bulk of the population has benefited significantly from improved housing conditions. Yet perhaps 5% of families are still poorly-housed, and inequalities in access to housing have widened since the mid-1990s, as soaring real estate prices have produced strong distributional effects. Although the severity of the economic crisis seemed to portend a sharp downward correction, the market has in fact turned around and recovered vigorously in France as in many OECD countries, supported by exceptional financing conditions and policies to stimulate demand. While the risk that prices will fall is non negligible, particularly if credit conditions tighten, the situation in France seems to reflect a shortage of housing supply, concentrated in certain "strained" geographic areas. The key role that housing plays in ensuring the social inclusion of individuals and the many imperfections inherent in the housing market justify government intervention. A crucial question is whether the policies being implemented are helping to correct these imperfections efficiently or whether, on the contrary, they are amplifying them, with possible negative spillovers on employment, economic growth or equity. The general principles underlying government housing policies should embrace three aspects: income-tested assistance to individuals, the most effective instrument because it allows for better targeting; direct support for housing supply in areas of excess demand, especially through the social sector, which should focus on disadvantaged households; and the removal of obstacles that work against market mechanisms, so as to make supply more responsive and the market more fluid and transparent, and to limit the many distortions induced by regulation, taxation and subsidies. This Working Paper relates to the 2011 OECD Economic Survey of France (www.oecd.org/eco/surveys/france).
French
Poor labour-market outcomes remain one of Poland’s major structural weaknesses, impeding firms’ competitiveness and the nation’s potential output. Boosting employment prospects is also critical, as the country will soon be ageing at a fast pace. Despite long working hours, labour utilisation is only average due to structurally low employment rates, particularly at both ends of the age spectrum, with some marked regional differences. The female employment rate is especially low, in part due to poorly designed family and pension policies. Insufficient product-market competition and obstacles to internal mobility induce significant resource misallocation. Employment protection is not particularly stringent, but the labour market is nonetheless heavily segmented. This is likely to weigh on economic performance by limiting investment in human capital and making some specific groups bear a large share of adjustment costs. Public employment services suffer from a lack of resources and function inefficiently. Local labour offices have limited incentives to adopt best practices; the government plans to start benchmarking them. There is ample scope to tighten jobseeker obligations and reform social and tax policies to make work pay. This Working Paper relates to the 2014 OECD Economic Survey of Poland (www.oecd.org/eco/surveys/economic-survey-poland.htm).
Rapid economic growth over the past two decades has substantially increased employment in Luxembourg, which has largely been met by in–flows of cross–border workers and, to a lesser extent, immigration. Unemployment has remained low compared to other European countries. These significant social changes have been absorbed without substantially widening income disparities, facilitated by the generous welfare system made affordable by the strong economy. However, this favourable overall picture masks weaknesses in the design of labour market institutions and social transfers that reduce incentives to work for resident workers. Despite the strong economy, this has resulted in lower employment rates for certain groups of residents, notably those who are second–earners, younger or older, or from poorer socioeconomic backgrounds. Furthermore, the incentives provided by existing labour market institutions could make adjustment to changed economic prospects more difficult. The functioning and adaptability of the labour market could be improved without undermining social cohesion through a range of related measures. This could include aligning minimum wage adjustments more closely with economic conditions, which could be achieved through a Minimum Wage Council, and softening employment protection legislation. To raise incentives of residents, social benefits should be decoupled from average wages, and social transfers could be reoriented towards in–work social benefits. This Working Paper relates to the 2010 Economic Survey of Luxembourg. (www.oecd.org/eco/surveys/Luxembourg)

Parties established the Mitigation Work Programme (MWP) at COP26 to ”urgently scale up mitigation ambition and implementation” to help reach the temperature goal of the Paris Agreement. At COP27, Parties further fleshed out the MWP, which will be operationalised each year between 2023-2026 via at least two global dialogues, other dialogues and investment-focused events. This paper outlines key questions that could shape the aims, scope, focus, format, and participation in the dialogues, as well as the possible interplay between the MWP global dialogues and investment-focused events by drawing on experiences with other processes and events inside and outside the UNFCCC. This paper also provides lessons from examples in three sub-sectors where mitigation actions have been rapidly scaled up. This paper highlights several open questions related to the substance, process, and timing of the global dialogues and the investment-focused events, as well as potential linkages between these. The paper also discusses possible implications of different choices on these open questions. Decisions on the scope, format, and aims of the MWP dialogues will influence their impacts and the relevance of these dialogues to different countries and stakeholders. Yet, dialogues and events under the MWP will face trade-offs between concentrating on short- versus longer-term issues and outcomes and on choosing a broad or narrow focus. Such choices will impact how many countries the event or dialogue is relevant to. In addition, there are various ongoing initiatives and events outside the UNFCCC that are relevant to the aims of the MWP and that the MWP could usefully learn from. Careful mapping and co-ordination are needed to ensure that the MWP builds on, rather than duplicates, existing initiatives and events within and beyond the UNFCCC.

Aid and trade policies – in OECD countries and in developing countries – might reinforce each other to promote development, or they might be substitutes: the sign of the correlation between trade and aid flows depends on the context. East Asia’s rapid growth demonstrates the important development impact of the trade-aid link. While aid has played a strong complementary role for trade development in Viet Nam, for example, the current impasse of African cotton producers is emblematic of trade and aid policies working at cross purposes. The experience of six African countries reviewed in this brief highlights the case for development assistance that aims to eliminate bottlenecks preventing a greater and deeper African participation in the global trading system. The scaling-up of aid, macroeconomic stability and trade expansion are compatible and the ongoing international “aid for trade” initiative will remain critically relevant for African development in the coming decades.
French
Indonesia abounds with natural resources. But the unique nature of its geography, coupled with the lack of transport infrastructure, makes their exploitation challenging. Moreover, a lack of investment, protectionism and an unwieldy regulatory environment are all inhibiting the sector from reaching its full potential. Agriculture has been held back by low productivity, under-investment, unclear property rights on land, ill-advised trade regulations, misplaced support for staples and restrictions on foreign ownership. By pursuing crop diversification, encouraging co-operation between smallholders and large estates and easing constraints on foreign investment, Indonesia could raise its farmers’ productivity. Fossil fuels have become central to Indonesia’s energy policy and its main source of export revenues. Growing environmental concerns, both domestically and internationally, combined with subsiding coal prices and the on-going shale gas revolution, call into question the sustainability of such a strategy. Indonesia should increase its energy efficiency and further develop gas to plug the gap until sufficient renewable energy, especially geothermal, comes on line. Government control over the oil industry via state-owned Pertamina should be gradually reduced. Clarifying, streamlining and publicising simple regulations in energy and minerals, especially regarding land rights and on-shore processing, and removing foreign-ownership restrictions will help bring much needed investment. The pressure on the environment that natural resource exploitation is creating should be addressed by increasing the share of gas and renewables in the energy mix, properly defining property rights and regulations regarding forest land, and implementing a positive implicit carbon price. More resources should be devoted to combating widespread illegal mining and deforestation. This Working Paper relates to the 2015 OECD Economic Survey of Indonesia (www.oecd.org/eco/surveys/economic-survey-indonesia.htm)
Surveys suggest that Denmark ranks close to or slightly above the OECD average in terms of student and adult skills, even though Denmark spends more than many OECD countries on education, labour market policies and adult learning. Sluggish productivity growth over the past two decades raises the question of how to develop better skills and use them more efficiently to achieve stronger and more inclusive growth. Improving the performance of compulsory and tertiary education would help all students acquire the right skills. Ensuring adults upgrade their skills is another key challenge, which involves strengthening the adult learning system. Reforms of taxation and of the wage setting system in the public sector would promote a better allocation of skills economy-wide. Finally, to activate skills more broadly, reforms to raise labour market participation should continue and the efficiency of active labour market policies will have to be increased further. This Working Paper relates to the 2013 OECD Economic Survey of Denmark (www.oecd.org/economic-surveydenmark. htm).

Many OECD countries have taken steps to increase competition in areas that have been typically dominated by public monopolies in the past. The goal is to improve the production and delivery of public goods and services. Among these areas, governments have introduced market signals to make the public employment service (PES) contestable in some of its activities in order to improve its effectiveness. This has involved i) liberalisation of the rules and regulations governing private employment agencies; ii) the use of market-type mechanisms (MTMs) such as contracting-out; and iii) organisational reforms, for example separating purchasers and providers of services to jobseekers.

Separating purchasers and providers is an important requirement to make the delivery of public services contestable. For example, if the PES provides training and also purchases it on the open market, it may have the incentive to deal with only one segment of the market, making it difficult to compare its ...

The Slovak Republic is a country with a limited natural resource base, an important manufacturing sector and rising materials consumption. Coherent polices that aim at increasing resource efficiency and achieving green growth are vital for sustainable growth and increased prosperity. This paper identifies a number of options for improving resource efficiency in the Slovak Republic.

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