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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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What Drives Productivity Growth at the Industry Level?

This chapter extends the analysis of how policy influences growth by exploring industry-level data. In particular, it assesses how different policy and institutional settings in both product and labour markets affect productivity and innovation activity. Aggregate productivity patterns are largely the result of within-industry performance in the OECD countries, and the latter is negatively affected by strict product market regulations, especially if there is a significant technology gap with the technology leader. There is also evidence of an indirect negative effect of strict product market regulations on productivity via their impact on innovation activity. Likewise, by raising labour adjustment costs, strict employment protection legislation tends to hinder productivity, unless these higher costs are offset by lower wages and/or more internal training. However, strict employment protection legislation does not affect innovation activity, but rather tends to tilt sectoral specialisation towards industries where technological enhancement can be accommodated with internal training.

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