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2017 OECD Economic Surveys: Luxembourg 2017

image of OECD Economic Surveys: Luxembourg 2017

Luxembourg’s economic performance is robust thanks to its dynamic services sector, sound fiscal policies and openness to global talent. The pace of job creation is strong and benefits not only residents but also cross-border workers and immigrants. The large financial sector is well supervised, but to reduce reliance on the financial industry the government should further develop its long-term strategy focusing on new digital technologies and renewable energy.

Supplying the skills needed in these new sectors will require further improvements in the education system, with a focus on lifelong learning. Better alignment of skills with labour market needs would entail reorienting labour market policies from supporting job creating towards funding training programmes to facilitate the reallocation of labour. Luxembourg benefits from immigrants who play a successful role in the economy. Integration challenges remain, though, especially regarding people from non-EU countries, who suffer from high unemployment. As language proficiency is a key precondition for successful integration, public supply of language courses should be stepped up further. Education reforms seek to make schools more equitable, also for the children of immigrants, and equality between men and women is being promoted by easing access to childcare and making taxation more gender neutral.

SPECIAL FEATURES: BOOSTING SKILLS; IMPROVING THE INTEGRATION OF IMMIGRANTS

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Assessment and recommendations

Luxembourg is an advanced economy with the highest per capita income in the OECD, reflecting the dynamic services sector, notably in banking and other financial services. Foreign investment is attracted by the business-friendly regulations, predictable tax system and sound macroeconomic policies. Foreign workers are attracted by the abundance of jobs and many cross-border workers commute every day from neighbouring regions. More than 40% of total employment is filled by non-residents, while some 45% of residents are foreigners who do not hold Luxembourg citizenship. Because of the high share of cross-border workers the gross national income (GNI), which excludes factor income from domestic production that accrues to non-residents, is lower than gross domestic product (GDP) by about a third (OECD, 2015a).

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