The Productivity-Inclusiveness Nexus

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Historically low productivity gains and record high inequality are major challenges for policy makers around the world. Both concerns have been exacerbated by the global financial crisis but took roots well before and reflect fundamental challenges with the way our economies function.

This report proposes a new comprehensive approach to promote better productivity performance and reduce inequalities. It not only gathers the most recent empirical evidence on the main factors behind slowing productivity gains and rising or persisting inequalities but also suggests possible common foundations and linkages between these two trends. It stresses the risk of a vicious cycle setting in, where individuals with fewer skills and poorer access to opportunities are confined to unproductive and often precarious jobs. This reduces aggregate productivity and widens inequality. The report focuses on how to expand the productive assets of an economy by investing in the skills of its people and providing an environment where all firms have a fair chance to succeed, including in lagging regions. It draws preliminary conclusions on the type of policy packages that are needed and on their implications for policy making. It also sets an agenda for future research to deepen empirical evidence and make concrete country-specific policy recommendations.

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We have reached a pivotal moment for the world economy. Eight years on from the start of the financial crisis, weak trade growth, sluggish investment, weak demand, and a slowdown of economic activity in emerging economies continue to drag on global growth. As policy makers face up to the realities of an ever more complex and interconnected world, there is a need to look again at how our policy frameworks are configured in order to address multiple challenges. The moment is ripe for new solutions, and the first step has to be putting people’s well-being back at the centre of the policy efforts. In the spirit of the OECD’s New Approaches to Economic Challenges (NAEC) project and the All on Board for Inclusive Growth initiative, this is precisely what this report on the Productivity-Inclusiveness Nexus sets out to achieve.

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