OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Reviving productive investment in Estonia

Since the crisis, Estonia has experienced one of the most pronounced declines in the ratio of non-residential investment to GDP in the OECD. In addition, investment in intangible capital has remained well below OECD standards, partly explaining the low innovative capacities of typical Estonian firms. Uncertainty created by regional geopolitical tensions has played a role but poor investment performance stems from domestic factors too, such as a normalisation after the boom years, the lack of adequate skills and insufficient incentives for risk-taking. Improving lifelong learning and maintaining skilled mothers in employment can contribute to reducing shortages in skills needed by investors. Restructuring of insolvent firms should be eased to increase credit recovery and redirect capital to the most productive ones. Developing alternatives to bank funding can support investment in small and innovative firms. While there is room to improve the quality of infrastructure further, selection and prioritisation of projects should improve. Incentives for green investment, in particular to reduce pollution emitted by the oil shale industry and to achieve energy efficiency gains, could be strengthened.

This Working Paper relates to the 2017 OECD Economic Survey of Estonia (www.oecd.org/eco/surveys/economic-survey-estonia.htm).


Keywords: business environment, infrastructure, intangible capital, insolvency, financing, Fintech
JEL: G28: Financial Economics / Financial Institutions and Services / Financial Institutions and Services: Government Policy and Regulation; J24: Labor and Demographic Economics / Demand and Supply of Labor / Human Capital; Skills; Occupational Choice; Labor Productivity; O52: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Economywide Country Studies: Europe; G23: Financial Economics / Financial Institutions and Services / Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors; Q56: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth; G21: Financial Economics / Financial Institutions and Services / Banks; Depository Institutions; Micro Finance Institutions; Mortgages; E22: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Investment; Capital; Intangible Capital; Capacity
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