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2003 OECD Economic Surveys: Luxembourg 2003

image of OECD Economic Surveys: Luxembourg 2003

This 2003 edition of OECD's periodic review of Luxembourg's economy examines recent economic developments, prospects and policies and includes special features on policies to strengthen growth in national income and on migration.

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Policies to Strengthen Growth in National Income

Luxembourg residents have benefited from high economic growth based on the intensive use of inputs of foreign capital and labour, which has generated tax receipts that have helped to finance very generous social benefits and an expansion in well-paid public sector jobs (see Chapter IV). In addition, high growth in cross-border employment has provided a buffer for the national (i.e. resident) labour market in the event of adverse economic shocks, helping to keep structural unemployment low despite labour-market institutions that in other OECD countries have contributed to large increases in structural unemployment. In the likely event that medium-term growth in the future is lower than in the past, reflecting a normalisation of prospects for the financial sector, growth in taxes will be less and a higher proportion of the burden of adjustment to adverse labour-market shocks will fall on residents. This chapter discusses policies that could help to attenuate the decline in growth in national income and facilitate national labour-market adjustment to adverse shocks. These focus on increasing the employment rate, improving the performance of the education system, increasing the efficiency with which government achieves its objectives, including sustainable development, and increasing competition in the provision of internet services.

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