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Social institutions face many challenges. The recent economic crisis has provided a stress test as it has left a legacy of high unemployment and high government debt in many countries. It also lowered potential output and thus the revenue base for social protection schemes. At the same time, ageing and other secular trends raise long-term sustainability issues. The design of social institutions determines their capacity to deal with shocks and trend changes and the way risks are shared between the institutions and their stakeholders. They also circumscribe the scope for automatic or discretionary adjustments, when trade-offs between sustainability, adequacy and efficiency arise. This report examines the sustainability of social institutions and their ability to absorb and cope with short-term shocks and longer-term trends by providing risk sharing and expenditure smoothing, focusing on pension, health care and unemployment insurance schemes.

The recent economic crisis has provided a stress test for the vulnerability of social institutions. This paper assesses the vulnerability of social institutions in light of the current crisis, and surveys past episodes, when social institutions faced similar challenges. Public pay-as-you-go pension systems have generally weathered the crisis well, but private pension funds were severely affected by the financial crisis. While health care spending drifted up further in the early part of the crisis, it levelled off in 2010 and 2011, on average in the OECD, for an unprecedented two years with no spending growth. But, in countries hard hit by the crisis public outlays on health care declined considerably. Unemployment insurance expenditure increased during the crisis in most OECD countries. In some countries, spending rose considerably more than the number of unemployed, reflecting an extension or more generous benefits, while in others the increase was considerably smaller, pointing to adequacy problems of those unemployment insurance schemes. Five country case studies focusing on how social institutions absorbed shocks in the more distant past are also examined and lessons are drawn from these experiences.

Semiconductors are a critical input into a wide range of downstream industries, including the wider information communications technology industry, electronics and motor vehicles. Semiconductor shortages can have large adverse effects on output in these industries, with ripple effects on the broader economy, as highlighted by recent supply chain disruptions. This paper maps cross-country and cross-sectoral dependencies in the semiconductor value chain based on new OECD Inter-Country Input-Output data that allow to analyse the semiconductor industry separately from the wider computer and electronics value chain. It further discusses policy options to reduce the economic consequences of shocks to the semiconductor value chain while preserving the benefits of global sourcing.

While public regulation in food and agriculture is attracting attention at both policy and research level for their potential implications on international food trade, policy implications of agricultural standards – understood to be legally not mandatory and hence voluntary – are much less well understood. Yet, environmental and organic standards have grown in importance in agriculture and agri-food chains, making also their potential trade effects more relevant. In this context, understanding the linkages between governments and standards has become a key element in the debate. This report analyses possible roles of public authorities in the area of environmental and organic standards, including policy objectives, options for interaction and means for the use of standards for achieving public policy goals. It identifies the main objectives behind government activity on environmental and organic standards in the area of consumer protection and fraud prevention, the enabling of functioning food markets and the improvement of efficiency in the design, implementation and monitoring of public policies. Countries have taken very different approaches towards dealing with standards on organic agriculture which frequently, though not always, are seen as a subset of environment-related standards. Choices for organic standards range between market self-regulation and the development of government-owned public standards. More generally, the level of public intervention often reflects OECD governments’ perception on the environmental benefits of organic agriculture itself.

In this paper, we aim to examine how voluntary carbon markets can provide a valuable contribution to strengthening domestic and international climate policies. Voluntary markets are defined as small and unregulated segments of an established carbon market that are driven by voluntary offsetting of GHG emissions.

France devotes a great deal of resources to vocational training for youths and especially adults, but the system is unduly complex and yields rather poor returns. The basic literacy and numeracy skills of many French adults remain weak in international comparison, with harmful effects on employment opportunities, wages and well-being. Access to basic skills training is poor for those who need it most, many of whom come from disadvantaged socio-economic backgrounds. Secondary vocational education and apprenticeship training still suffer from a serious image problem in the minds of French families, even though the latter have a good track record. The government has succeeded in ensuring that the number of apprenticeships is growing, but that is mostly due to those studying at the tertiary level or at least for a higher secondary diploma. The labour market outcomes of those with only shorter vocational qualifications are not good, and quality in that stream needs to improve. To do so better teachers and workplace trainers need to be attracted to the field, especially individuals who can better link practical experience and theoretical concepts. The financing of the adult training system involves complex collection mechanisms even following a major recent overhaul. Making further changes will have to confront entrenched interests, even if the use of the training levy to finance business groups and unions has now ended. The goal is to direct more training funds to workers in small firms who have the weakest skills as well as to jobseekers, but this might be more easily achieved by shifting the funding base from a levy on employers to fiscal incentives or direct subsidies. There remains a need to align responsibilities for adult training with corresponding control over funds. Workers are henceforth to be given personal training accounts in which they can accumulate rights to up to 150 hours of training. But the enormous number of providers and courses on offer calls for greater efforts to develop good guidance, evaluation and certification systems to ensure the training finally chosen is appropriate and of sufficiently high quality.

The development of broadband Internet access, has triggered a shift in voice traffic from traditional public switched telephone networks (PSTN) to alternative Internet Protocol (IP) networks.

In recent years, academics and policy makers have emphasised the role of human capital formation in economic development. By creating human capital, countries become more attractive to private investment, both domestic and foreign. And through such investment, countries grow and prosper.

Yet the empirical evidence in support of this theory remains elusive. While foreign direct investment (FDI) has multiplied in many countries around the world since the 1980s, its effects on growth are uncertain. Why is that the case?

In this paper I argue that political economy pathways exist that may lead countries away from sustained growth. In countries that lack well-developed capital and education markets, many otherwise qualified citizens may be denied the basic skills they need in order to contribute fully to the nation’s economic development. As societies become divided, they become more conflicted, and this conflict dampens growth, irrespective of the level of foreign direct investment ...

Virtual worlds are increasingly evolving into Internet-mediated “spaces”, where large groups of people meet and interact in real-time while experiencing a shared sensation of being there together. This enables richer and more dynamic social interaction and collaboration across national and cultural boundaries over the Internet compared to other traditional ICT-based collaboration environments.

Very Large Research Infrastructures (VLRIs) are unique, complex undertakings with a strong international dimension that play a critical role in frontier research in most scientific domains. VLRIs require considerable care in their construction and operation, as well as very substantial investments and technological innovations. Recent evolutions in the political, socio-economic and scientific context are challenging their established planning and management models. This policy report identifies and analyses good practices and presents a series of lessons learned regarding the establishment of VLRIs, options for improving their use and operation, as well as more strategic considerations that VLRI managers, funders and decision-makers should take into consideration.

Firms find advantages in sourcing inputs from abroad and in fragmenting their production process. On average, vertical trade represents about one third of total trade among OECD countries. This report describes and illustrates new firm strategies of vertical specialisation and explores the policy implications of new patterns of trade and FDI. It is in services industries that vertical trade has increased the most in recent years. While vertical trade seems to respond to the same determinants as the rest of exports and imports, distance-related trade costs play a more important role in explaining the volume of bilateral trade flows resulting from vertical specialisation. Distance-related costs have a lower impact on foreign direct investment and sales of foreign affiliates but there is a complementary relationship between trade and FDI. Vertical specialisation networks have created new challenges for trade policymakers. In particular, growth of bilateral exchanges between countries depends increasingly on barriers to trade and investment in the rest of the world. Moreover, the impact of a country’s own trade barriers on domestic firms is significant in the context of vertical specialisation. The analysis stresses the importance of multilateral negotiations for trade and investment liberalisation.

This paper examines the issue of intra-industry trade in a transition economy. We address the question of whether the market-opening reforms in China have resulted in an increasing exchange of similar products, or whether foreign trade is still playing the role of filling the gap of products not produced within the country. We find that the proportion of intra-industry trade in China-OECD trade has increased from 12 per cent of total manufacturing trade in 1980 to over 20 per cent in 1992. The highest shares of intra-industry trade with China are reported for Japan and the United Kingdom.

Due to the large differences between China and the OECD countries in terms of factor endowments, we expect intra-industry trade to be of the vertical nature, i.e., two-way trade in varieties of a product characterised by different qualities. Empirical evidence indeed shows that the majority of the intra-industry trade between China and the OECD is of the vertical nature; China exports lower quality ...

Spain's expanding venture capital market is still biased towards mature firms in traditional sectors with little investment in technology-based start-ups. Although the country has benefited from substantial inflows of foreign venture capital, steps are needed to increase domestic levels of entrepreneurship and risk investment expertise. The government maintains a number of small firms participatory loan schemes, which could be transformed into privately-managed equity programmes to attract venture investors. Restrictions relating to authorised venture investors and amounts could also be lightened. This paper analyses trends in Spanish venture capital markets and makes policy recommendations which have been developed through an OECD peer review process ...

The Norwegian venture capital market is oriented towards expansion investments in traditional sectors and suffers from a lack of private risk capital as well as of entrepreneurial demand. Norway needs to increase the entry of innovative start-ups in order to diversify the economy beyond its resource-based sectors. In addition to reducing its dominant role in providing venture capital through privatisation of SND Invest, the government should further privatise industrial holdings, reduce quantitative restrictions on institutional investors, and remove the wealth tax which deters venture investing. This paper analyses trends in Norwegian venture capital markets and makes policy recommendations which have been developed through an OECD peer review process.

The small Portuguese venture capital market is characterised by expansion-stage investments in manufacturing industries, primarily consumer goods. Government equity programmes, which have tended to be investment vehicles for European structural funds, have crowded out potential private investors. Recent initiatives, including a new venture captial law and a scheme aimed at leveraging private venture funding, should help stimulate venture activity. Measures are also needed to foster the emergence of more entrepreneurs, create a less risk-averse investment culture, and take fuller advantage of international venture capital flows. This paper analyses trends in Portuguese venture capital markets and makes policy recommendations which have been developed through an OECD peer review process ...

The United States has the oldest and most developed venture capital industry in the OECD. Several successful high-technology companies in computers and communications, as well as in healthrelated sectors and services, were venture-backed. Young high-growth firms also benefit from a continuum of complementary finance from business angels, institutional investors and second-tier stock markets. The government played an active role in the early phases of the venture capital industry through the Small Business Investment Company (SBIC) program and various technology development schemes. A reduction in capital gains tax rates and liberalisation of rules for pension fund investments in risky assets in the late 1970s also unlocked new capital sources. Venture capital activity, however, has been quite cyclical. Periods of high fund-raising and investment in the 1980s and 1990s were followed by market downturns with negative effects on small firm survival and growth. Fundamental structural ...