Browse by: "2009"

An entitlement is a provision of law that establishes a legal right to public funds. In most OECD countries, entitlements were the principal growth area of public expenditure from the mid 1950s to the mid 1980s. This article discusses budgeting for entitlements under two rather different conditions: the expansion of this category of expenditure during the quarter century after World War II, and cutback and “status quo” budgeting during the decade since the first oil shock.

By Allen Schick, University of Maryland, United States

Thanks to financing from the European Regional Development Fund (ERDF) (2009-2013 Programme) and other Italian funding programmes, the Campania Region has begun a project to improve the quality of its school buildings, in partnership with the research centre CISEM of Milan.1 The Educational Quality Facilities (EQF) project has a total budget of about EUR 600 million. The Campania Region will allocate the necessary funds to the municipalities and provinces for the construction and equipment involved.

The financial sector has emerged as the main economic engine over the past two decades. The comparative advantages of placing financial activities in Luxembourg have mostly been in terms of an adaptive legislative and regulatory framework and low taxation. As a result, Luxembourg is today one of the main international centres for investment funds. Besides the sector’s direct and indirect employment effects, the most important effect is the large tax revenue generating capacity of the sector, accounting directly for over 20% of aggregate tax revenues. On the other hand, these tax revenues are volatile as the sector is highly sensitive to developments in international financial markets. Indeed, past downturns in international financial markets have tended to lead to a sharp slowdown of growth in the economy as well as in revenues, pointing to potential large risks associated with the current turmoil in international financial markets. Besides these short-term considerations, a lower trend growth rate of the sector is likely over the medium term. The main activities of the sector are in middle and back offices dealing with financial administration which, with new IT technologies, will tend to be increasingly outsourced. At the same time, the sector is having problems in attracting highly specialised talent to enter higher value front office activities. Over the longer term, international competition will continue to exert pressures that may eventually erode Luxembourg’s position. The extent of the decline in the sector’s trend growth depends on the ability to maintain and expand the attractiveness of investing and working in Luxembourg. Achieving this will depend on being able to adjust tax, infrastructure, and housing policies to attract foreign talent while updating and increasing the transparency of financial sector regulation.

From 2000 to 2007, Estonia was one of the fastest growing emerging market economies. A housing boom, fuelled by capital inflows and credit, resulted in skyrocketing house prices and an over-expanded construction sector. However, the currency board limited the Bank of Estonia’s ability to curb credit growth, while the fiscal policy framework amplified the cycle through pro-cyclical spending increases and tax cuts. As credit was mostly financed by cross-border loans from foreign banks, the risks of disruptions to credit flows and financial contagion have increased. Some have already materialised through tightened lending standards and capital outflows. Estonia is now in a severe recession. To restore high and sustainable growth, the country will need to rebalance its resources from non-tradables towards exports. Regaining external competitiveness will be challenging, however, given the fixed exchange rate and recent devaluations in partner countries. Flexibility of the economy will thus be crucial. Over the medium term, policymakers could also strengthen incentives for a better functioning of the housing finance market and gradually remove the pro-cyclical bias of fiscal policy.

The present article focuses on issues related to asset decumulation. In discussing these issues, a key proposition is that financial institutions are most willing and able to offer decumulation products with fixed payment promises to the extent they are able to invest in financial assets that allow them to hedge a considerable part of the risks associated with the payment promises they extend.
Indeed, what is sometimes overlooked in discussions bout shifts from asset accumulation to decumulation is that the decumulation phase also involves investment challenges, especially if specific patterns of payouts such as regular payouts of fixed amounts are aimed at. Many writers have argued for some time now that pension fund managers will have difficulty implementing asset-liability matching because there are insufficient quantities of suitable assets. As it turns out, the shortfall in hedging instruments extends to more than just the “toxic” tail of longevity risk, as is commonly being argued. The analysis in this article shows that hedging interest rate risk is also not as straightforward as one may think.

This paper addresses the causal impact of being raised in a sole-parent family on child well-being across the OECD. The question is answered by a cross-OECD meta-analysis and a literature review. There are widely varying rates of sole parenthood across the OECD. Rates of sole parenthood have generally been rising in the past few decades. Inevitably, countries with higher rates of sole parenthood are more concerned about the potential well-being effects on children. The reasons for sole parenthood include never having partnered, having separated and divorced, and being widowed. The composition of sole parents by these reasons varies widely across OECD countries. Views on the desirability of two-parent families for raising children are also divergent across the OECD.

This document provides a first comparative overview of the presence and outcomes of the children of immigrants in the labour markets of OECD countries, based on a collection of data from 16 OECD countries with large immigrant populations. Its key findings are the following: • In about half of all OECD countries, children of immigrants - both native-born offspring of immigrants and foreign-born who immigrated before adulthood with their parents - account for ten or more percent of young adults (aged 20-29) in the labour market. • Most children of immigrants have parents from low- and middle-income countries, and the share with parents from such countries is larger among foreign-born children than among the nativeborn offspring of immigrants. This is a result of the diversification of migration flows over the past 20 years. • Among the native-born children of immigrants in European OECD countries, Turkey is the single most important country of parental origin, followed by Morocco. When comparing the countries of parental origin for the native- and the foreign-born children of immigrants, one observes in the European OECD countries a strong decline in the importance of the origin countries of the post-World War II wave of labour migration, in particular Turkey but also Morocco, Italy, Portugal and Pakistan. • In all countries except Germany and Switzerland, a large majority of the native-born children of immigrants have obtained the nationality of their countries of residence. • The OECD’s Programme for International Student Assessment (PISA) has demonstrated lower assessment results for the children of immigrants in most European OECD countries. There are close links between PISA outcomes and educational attainment levels. In the countries in which children of migrants have large gaps in PISA-scores vis-à-vis children of natives, children of immigrants are also strongly overrepresented among those who are low-educated. • One observes a clear difference between the non-European OECD countries (Australia, Canada, New Zealand and the United States) on the one hand and European OECD countries on the other hand. In the former, the children of migrants have education and labour market outcomes that tend to be at least at par with those of the children of natives. In the European OECD countries (with the exception of Switzerland), both education and labour market outcomes of the children of immigrants tend to be much less favourable. • Part of the differences in labour market outcomes observed in most European OECD countries is due to the fact that the children of immigrants tend to have a lower educational attainment than the children of natives. However, significant gaps remain in many of these countries even after correcting for differences in average educational attainment. • The remaining gaps are particularly large for the offspring of migrants from Turkey and from certain non-OECD countries such as Morocco. In all countries, children with parents from middle-and low-income countries have lower outcomes than children of immigrants from highincome countries. The differences are particularly large for young immigrant women. • On average over the OECD countries for which data are available, the children of immigrants have an unemployment rate that is about 1.6 times higher than that of the children of natives, for both genders. The children of immigrants also have lower employment rates – the gaps compared with the children of natives are about 8 percentage points for men and about 13 percentage points for women. • For women, one observes much better results for the native children of immigrants than for young immigrants, suggesting that having been fully raised and educated in the country of residence brings some additional benefit. However, this is not observed for men, where the native-born children of immigrants do not seem to fare better than the young immigrants, particularly after accounting for the lower educational attainment of the latter group. • The less favourable picture for the female children of migrants compared with their male counterparts is less clear-cut after controlling for socio-demographic characteristics, in particular marital status and number of children. Part of the “double disadvantage” for the female offspring of immigrants seems to be due to the fact that in the age range under consideration (20-29 years), they are overrepresented among those who are (already) married and have children. Indeed, once controlling for this, native-born women who have parents from the Maghreb region or Southern Europe, as well those with Turkish parental origin, tend to have higher employment rates - relative to comparable natives - than their male counterparts. • When in employment, children of immigrants are in occupations similar to those of the children of natives. They are also widely spread throughout the economy, but tend to remain underrepresented in the public sector.

This paper briefly reviews the historical development of the university system in Chile, and describes the current structure of funding, supply and demand for tertiary education, research and university services. Both public and private universities in Chile have expanded and restructured, access to tertiary education has improved, and universities have contributed to the country’s national innovation system. However, steep challenges related to structure and performance in education and research remain, if universities are to meet the growing economy’s demands for productivity and competitiveness.

This paper outlines the principal areas which need improving: market access; quality of services; R&D and innovation spending; fiscal support; institution building and strategy co-ordination.

Les universités chiliennes en transition vers un régime politique gouverné par le marché

Cet article propose une brève présentation du développement historique de l’université au Chili et décrit la structure actuelle du financement, de l’offre et des besoins de l’éducation supérieure, de la recherche et des services universitaires. Les universités publiques et privées se sont développées et restructurées, l’accès à l’enseignement supérieur s’est amélioré et les universités ont contribué au système d’innovation national du pays.
Toutefois, pour répondre aux demandes de productivité et de concurrence d’une économie en pleine croissance, les universités devront faire face à plusieurs défis de taille, notamment en ce qui concerne la structure et les performances dans les systèmes de l’éducation et de la recherche.
Cet article expose brièvement les principaux points à améliorer : l’accès au marché, la qualité des services, les dépenses liées à la recherche, au développement et à l’innovation, le soutien budgétaire, la mise en place des institutions et la coordination stratégique.

Cities represent a challenge and an opportunity for climate change policy. As the hubs of economic activity, cities generate the bulk of GHG emissions and are thus important to mitigation strategies. Urban planning will shape future trends and the concentration of population, socio-economic activity, poverty and infrastructure in urban areas translates into particular vulnerability to increased climate hazards. City governments and urban stakeholders will therefore be essential in the design and delivery of cost-effective adaptation policies. Further, by empowering local governments, national policies could leverage existing local experiments, accelerate policy responses, foster resource mobilization and engage local stakeholders. This paper presents a framework for multilevel governance, showing that advancing governance of climate change across all levels of government and relevant stakeholders is crucial to avoid policy gaps between local action plans and national policy frameworks (vertical integration) and to encourage cross-scale learning between relevant departments or institutions in local and regional governments (horizontal dimension). Vertical and horizontal integration allows two-way benefits: locally-led or bottom-up where local initiatives influence national action and nationally-led or top-down where enabling frameworks empower local players. The most promising frameworks combine the two into hybrid models of policy dialogue where the lessons learnt are used to modify and fine-tune enabling frameworks and disseminated horizontally, achieving more efficient local implementation of climate strategies.

Maritime transport costs have a significant impact on the trade in agricultural goods. Maritime transport costs represent a high proportion of the imported value of agricultural products -- 10% on average, which is a similar level of magnitude as agricultural tariffs. This study shows that a doubling in the cost of shipping is associated with a 42% drop in trade on average in agricultural goods overall. The tendency to source imports from countries with low transport costs is therefore strong. Trade in some products is particularly affected by changes in maritime transport costs, in particular cereals and oilseeds, which are shipped in bulk. Time spent in transit also has a strong effect on trade: an extra day spent at sea on an the average sea voyage of 20 days implies a 4.5% drop in trade between a given pair of trading partners. Not only cost but also efficiency in getting agricultural goods to market are therefore important factors in explaining trade flows.

There are local air pollution benefits from pursuing greenhouse gases emissions mitigation policies, which lower the net costs of emission reductions and thereby may strengthen the incentives to participate in a global climate change mitigation agreement. The main purpose of this paper is to assess the extent to which local air pollution co-benefits can lower the cost of climate change mitigation policies in OECD and non-OECD countries and can offer economic incentives for developing countries to participate in a post- 2012 global agreement. The paper sets out an analytical framework to answer these questions. After a literature review on the estimates of the co-benefits, new estimates, which are obtained within a general equilibrium, dynamic, multi-regional framework, are presented. The main conclusion is that the co-benefits from climate change mitigation in terms of reduced outdoor local air pollution might cover a significant part of the cost of action. Nonetheless, they alone may not provide sufficient participation incentives to large developing countries. This is partly because direct local air pollution control policies appear to be typically cheaper than indirect action via greenhouse gases emissions mitigation.

This study provides a general analysis of economic relations between Spain, as a donor of official development assistance (ODA), and Ecuador, as a partner and recipient of development aid. It seeks to assess the potential (in)coherence between Spain’s foreign economic activities and the goals of development and poverty reduction that the Spanish government established for its relations with developing countries. Hence, the study's main aim is to determine whether the Spanish government as a whole (and not just Spanish co-operation) is coherent with Ecuador’s development and thus coherent with Spain’s policies on international development co-operation. We therefore analyse the links between the two countries through trade, international remittances, foreign direct investment (FDI) and external debt, from a development point of view. The secondary aim is to offer recommendations to help make Spain’s activities more coherent with development. One main challenge that arises is the lack of an institutional framework for a wider set of relations between the two countries. Although there is an institutional basis for international assistance acitivites, it does not cover other economic activities such as trade or investment projects. As a result, incoherences appear, such as the approval of ODA trade credit lines that are eliminated in debt cancellation agreements a few years later.