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The Sources of Economic Growth in OECD Countries

image of The Sources of Economic Growth in OECD Countries

Understand growth disparities between OECD countries over the past twenty years through identification and analysis of underlying factors.

Growth patterns through the 1990s and into this decade have turned received wisdom on its head. For most of the post-war period, OECD countries with relatively low GDP per capita grew faster than richer countries. Since the late 1990s, however, that pattern has broken down with the United States notably drawing further ahead of the field. This publication provides a comprehensive overview of growth drivers across the OECD and the extent to which disparities are attributable to factors like new technology and R&D, macroeconomic policy, education and training, labour market flexibility, product market competition, and barriers to business start-up and closure.

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Firm Dynamics, Productivity and Policy Settings

This chapter moves one step further in the examination of the policy determinants of economic growth by exploiting a new firmlevel database for ten OECD countries. It shows that the contribution to productivity growth from firm dynamic processes should not be overlooked, most notably in high-tech industries where new firms tend to boost overall productivity. There is evidence that burdensome regulations on entrepreneurial activity as well as high costs of adjusting the workforce negatively affect the entry of new small firms. Overall, there are a number of different features of entrant and exiting firms across countries. In particular, in the United States entrant firms tend to be smaller and with lower than average productivity, but those which survive the initial years expand rapidly. By contrast, firms tend to enter with a relatively higher size and productivity in Europe, but subsequently do not expand significantly. These findings tend to support the hypothesis of greater market experimentation in the United States, compared to many continental European countries, which in turn is likely to be the result of differences in regulatory settings across the Atlantic.

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