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The Productivity-Inclusiveness Nexus

image of The Productivity-Inclusiveness Nexus

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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Inequalities of income, wealth and well-being

What lies behind the increase in income inequality in most advanced countries over the last three decades? What is the picture in key emerging economies? Has the growth of income inequality been mirrored by rising inequalities of wealth, well-being and opportunity? This chapter charts the drastic rise of income inequality in OECD countries since the 1980s, examining the key drivers over the short and longer term with a focus on the role of technological change, reforms to labour market institutions and the advance of globalisation. The chapter also considers the more heterogeneous picture found in key emerging economies where overall, despite declines in some places, inequality remains at very high levels. It then goes on to explore trends in inequalities in wealth and such important determinants of well-being as access to employment, education outcomes and health. Finally, the chapter looks at how multidimensional inequalities tend to be mutually reinforcing, as is suggested by their concentration in disadvantaged areas.

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