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2002 OECD Economic Surveys: Norway 2002

image of OECD Economic Surveys: Norway 2002

This 2002 edition of OECD's periodic review of Norway's economy  examines recent economic developments, policies and prospects and includes special features on enhancing the effectiveness of public spending and on policies to boost potential output growth.

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Policies to Boost Potential Output Growth

While there are features of the Norwegian economy that favour strong growth in its already high standard of living, there are also some key weaknesses that significantly hamper progress. National income per capita will continue to be boosted by additional revenues due to the natural resource wealth. Furthermore, the institutional framework of the Petroleum Fund reflects a commitment to prevent a surge in spending from being costly through a rapid structural shift from the exposed to the sheltered sectors. Other aspects of the Norwegian economy also favour high living standards. In particular, Norway’s tradition of work-oriented social inclusion encourages high labour force participation, and ensures that only a small minority of households plays no active role in the economy, thus reducing the risk that growth is associated with a sharp widening of the income distribution. At the same time however, the oil-wealth has created supply bottlenecks, masked the need for reforms, especially in product markets, and has encouraged a large government sector that lacks strong incentives to make efficiency gains. This chapter begins with a broad overview of the main growth challenges facing Norway and then analyses key developments in labour, product and capital markets as well as taxation issues.

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