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Inflation has quickly and significantly increased in most OECD countries since the end of 2021 and further accelerated after Russia’s war of aggression against Ukraine, mostly driven by surging energy and food prices. Certain categories of households are particularly vulnerable, as large parts of their consumption expenditures are devoted to energy and food. Drawing on national micro-based household budget surveys and on CPI data, this paper provides a quantification of the impact of rising prices on households’ welfare. Declines in household purchasing power between August 2021 and August 2022 are estimated to range from 3% in Japan to 18% in the Czech Republic. This decline is driven by energy prices in most countries, especially Denmark, Italy, and the United Kingdom, while energy prices play a lesser role in countries where inflation is more broad-based like the Czech Republic and the United States. In all considered countries, inflation weighs relatively more on low than high-income households. Rural households are hit particularly hard, most often more than low-incomes ones, and this is driven by energy price inflation. To cushion vulnerable households from rising inflation, especially from energy prices, these findings call for a careful targeting of income and price support measures, notwithstanding their administrative and logistical complexity, taking into account their effects on economic activity, inflation, and, last but not least, environmental goals.

The Covid-19 crisis has exacerbated the already deteriorating fiscal situation in South Africa. The current consolidation strategy, based on spending cuts and reprioritisation of spending items, has reached its limits and is insufficient to stabilise the debt ratio in the medium term and fund unmet public services needs. The tax-benefit system needs to be redesigned to create fiscal space in the years to come to finance growth-enhancing reforms and to reduce inequalities. The challenge is to generate additional revenues without generating inefficiencies or exacerbating inequality. Income taxes represent around half of total tax revenues, but are levied on small tax bases, partly reflecting the unequal distribution of income. Only the value-added tax has a relatively broad basis combined with a moderate tax rate. There is some scope to raise revenues further while reducing existing tax distortions, notably by broadening the base of corporate and personal income taxes, as well as consumption taxes. Taxes with a less harmful impact on growth, such as property taxes, are limited by the inefficient municipal rates system. There remains scope to further increase environmentally-related taxes.

Productivity growth has been falling for a decade, hindering improvements in living standards. Low productivity reflects, firstly, poor infrastructure in telecommunications and transport. Secondly, the regulatory environment is not always business-friendly and often raises obstacles to firm entry, exit and expansion. Combined with weak competition in important sectors, this has led to lower private investment levels, particularly, business R&D. Finally, the educational and health care systems have been unable to supply adequately skilled workers across the country. To improve productivity, public investment needs to become more effective, notably by strengthening the selection process for large infrastructure projects. A more pro-competitive business environment would let productive firms grow and foster innovation. Widening and reducing inequalities in access to education and health care would reduce skill shortages.

This paper aims at quantifying the macroeconomic and distributional impacts of product market reforms and additional public investment using a DSGE model. The model reflects specific features of the South African economy. Tradable and non-tradable product markets are modelled separately, and a segmented labour market is designed to reproduce the labour market duality in South Africa between skilled and unskilled workers. The role of public investment on total factor productivity and its financing modality are taken into allowing the quantification of the net benefits of reforms.

Our results show that enhancing competition in the non-tradable sector has a short run recessionary impact while deregulating the tradable sector is expansionary. Overall, the latter has a bigger impact on GDP. From a distributional perspective, a product market reform in both sectors benefits all income deciles. Finally, additional public infrastructure investment, either financed by raising VAT or capital income tax, increases GDP in the short-term less than product market reform in the tradable sector but is more expansionary in the long run, so a combination of both reforms would boost living standards.

The world's raw materials consumption is expected to nearly double by 2060. This is particularly alarming because materials extraction, processing, use and waste management lead to significant environmental pressures. A circular economy aims to transform the current linear economy into a circular model to reduce the consumption of finite material resources by recovering materials from waste streams for recycling or reuse, using products longer, and exploiting the potential of the sharing and services economy.

This paper underlines the synergies policy makers can create between different resource-efficient and circular economy transition objectives when designing policy packages. It also highlights potential trade-offs that may arise in their implementation. The paper shows that the existing OECD policy analysis provides a toolkit for governments to take more ambitious actions toward a resource-efficient, circular economy. In addition, OECD modelling studies project that the transition can bring significant environmental gains while preserving economic growth and social objectives.

The third in a series of three papers on cross-border government innovation, this paper focuses on hands-on delivery and implementation of cross-border innovation efforts, representing the culmination of the different types of initiatives, structures and mechanisms uncovered in the series of reports. It also discusses how governments are putting in place cross-border enablers to allow for collective design and implementation of innovative policies and services, which can also support all of the topics covered in the series. The paper offers findings based on hundreds of cases in countries as well as research and expertise, and provides lessons and recommendations for successful cross-border collaboration and innovation governance.

This paper presents new simulation results for the UK combining macroeconomic simulations in ThreeME, a computable general equilibrium model, with household-level micro-simulations with the aim to provide consistent estimates of macroeconomic and distributional consequences of policy action to curb greenhouse gas emissions. One main and overarching result is that if an economy-wide and significant carbon price is introduced it leads to large emission reductions. Macroeconomic and distributional consequences are very limited in comparison. Redistributing 30% of total tax revenue as a lump-sum transfer to households would ensure that a majority of income deciles in most regions increase their disposable income, with gains notably in the lower part of the income distribution.

The United Kingdom is among world leaders in reducing domestic greenhouse gas emissions, and a broad political consensus supports the target to reduce net emissions to zero by 2050. The UK’s strong institutional framework is an inspiration to countries around the world, and the country is pioneering work to embed climate considerations in the financial sector. Achieving carbon neutrality will require policy to match ambition. Emission reductions so far were largely driven by electricity generation, a sector targeted by explicit pricing instruments and a cost efficient renewables auction-design subsidy scheme. Expanding pricing instruments across the economy is an essential building block to reach targets. Such measures will be more effective if complemented by well-designed sectoral regulation and subsidies, and more acceptable if implemented once energy prices have started to come down from historically high levels. Britons are conscious of the need to act. However, winning their acceptance of the needed policies may require targeting carbon revenue to compensate low-income households and investments in green infrastructure and new technologies. A mechanism defusing fears that effective policies undermine competitiveness, preferably internationally agreed, would facilitate effective policies towards emission intensive trade exposed industries.

This work employs a novel approach to identify and characterise firms adopting Artificial Intelligence (AI), using different sources of large microdata. Focusing on the United Kingdom, the analysis combines data on Intellectual Property Rights, website information, online job postings, and firm-level financials for the first time. It shows that a significant share of AI adopters is active in Information and Communication Technologies and professional services, and is located in the South of the United Kingdom, particularly around London. Adopters tend to be highly productive and larger than other firms, while young adopters tend to hire AI workers more intensively. Human capital appears to play an important role, not only for AI adoption but also for firms’ productivity returns. Significant differences in the characteristics of AI adopters emerge when distinguishing between firms carrying out AI innovation, those with an AI core business, and those searching for AI talent.

Despite decades of experience with Deposit Refund Systems (DRS) in some countries and sub-national markets, there are only a few instances where DRS is complemented by additional mandatory extended producer responsibility (EPR) policy instruments within the same sector. In light of increasingly ambitious collection and recycling targets, countries and sub-national governments are considering the use of a DRS for specific products in combination with other mandatory EPR policy instruments.

This interplay of a DRS and other mandatory EPR policy instruments can lead to synergies, as it can improve the quality and quantity of recycling, enable reuse systems and incentivise eco-design. DRS also helps to address littering and influence consumer behaviour, which is difficult to address with other mandatory EPR policy instruments. This report identifies key insights that can guide the design and implementation of a DRS and its role in a broader policy mix including other mandatory EPR policies.

The Strength through Diversity Policy Survey collected information from 34 education systems on their policies and practices for equity/inclusion. The Survey revealed a great variation among the definitions of equity/inclusion, as well as among the definitions for the analysed dimensions of diversity. Education systems identified equity/inclusion as policy priorities in 2021/22 and, accordingly, changed their curriculum strategies and tailored the provision of instructional and non-instructional support to students. Education systems provided guidelines to promote teachers’ and schools’ collaboration with families and communities, and to help stakeholders respond to the diversity of student populations. Distribution of resources accounted especially for students with special education needs. Most education systems did not implement policies to promote diversity among school staff. Monitoring of diversity was unbalanced and relied heavily on academic outcomes. Few education systems used the term intersectionality in their jurisdictions, although several had policies that target the intersection of student groups.

OECD education systems place a premium on high-quality teaching and look to strengthen the attractiveness of the teaching profession in the mid- to long-term. This paper considers if, when and under what circumstances new or ameliorated inter-professional and cross-sectoral collaborations may strengthen the teaching profession. It also introduces “personas” as a tool to illuminate how various stakeholders may respond to a given policy. This tool can inform smarter policy design and implementation choices. Based on the literature within and outside the education sector and concrete, cutting-edge examples, the paper identifies common facilitating features and proposes a set of guiding principles that can aid policy makers and practitioners in decisions related to the introduction or development of cross-sector or inter-professional collaborations. The paper concludes that cross-sector and inter-professional collaborations, under certain circumstances, can strengthen the teaching profession, by supporting, attracting and retaining a diverse teacher workforce and improving student outcomes.

Despite the widespread effort to increase and improve the use of evidence in policy making and practice, practical efforts to enhance research-policy-practice engagement in the education sector often fall short of their ambition. Little is known about how such knowledge mobilisation initiatives can be characterised and how their impact can be understood and measured. This paper reviews theoretical and empirical literature on knowledge mobilisation focusing on the above research gaps. It conceptualises knowledge mobilisation actors and initiatives, discusses the shortcomings of the current literature, and proposes a set of frameworks that captures their objectives, functions and impact. It is hoped that these frameworks will support future empirical research efforts.

Irish authorities are reshaping the nation’s higher education landscape, creating a network of technological universities that merge, build on, and extend the mission of the country’s institutes of technology. Its emerging technological universities are tasked with providing research-informed teaching and learning across all levels of higher education, linking their programmes to the needs of their region’s citizens, businesses and professions. This paper was commissioned by Ireland’s Higher Education Authority and Department for Further and Higher Education, Research and Innovation, who asked the OECD to identify a set of benchmark higher education institutions from other OECD countries that can provide insights for the development of future Irish technological universities through examination of their human resource policies, career paths and organisational structures. Drawing upon this evidence, and analysis of current policies in Ireland’s institutes of technology and technological universities, this analysis identifies options for new career and employment contracts and organisation structures

Free trade zones (FTZs) are vulnerable to illicit trade; despite many governments and zone operators taking steps to mitigate these vulnerabilities, they remain especially acute in trading operations of specific goods. One of these is gold. High-risk gold originating in Latin America and the Caribbean is often laundered within the region before advancing to destination markets. This report examines the risks and vulnerabilities linked to financial crimes in gold trade through FTZs, focusing in particular on Colombia, Panama and the Dominican Republic.

Appropriately designed Product Market Regulation (PMR) is essential to enhance productivity, boost economic growth and increase welfare. Regulation is needed to address market failures and guarantee the health and safety of consumers. However, by limiting the entry and expansion of firms, a too stringent regulatory environment can hinder an efficient allocation of resources both within and across industries. This paper provides a detailed review of PMR in Indonesia and analyses the country’s performance in this area relative to OECD countries, other G-20 members and regional peers. To do so, it relies on the OECD’s PMR Indicators, which have been recently compiled for Indonesia. These indicators assess the extent to which the regulatory framework of a country is competition-friendly across a range of sectors and regulatory areas. The analysis reveals that PMR in Indonesia is less conducive to competition than in most OECD countries. The scope for improvement is particularly great in areas such as barriers in network sectors, command-and-control regulation, public procurement, the governance of State-owned Enterprises (SOEs) and the extent to which the impact on competition is assessed when designing new regulation. The paper proposes concrete policy measures to align the regulatory environment of Indonesia with that of best performing countries.

OECD Programme for International Student Assessment (PISA) scaling methodologies are reviewed from the mathematical perspective. In particular, the paper aims to elucidate the model structures and the model assumptions of item response theory used in the item scaling phase, the latent regression model employed in the student prior estimation phase, and the population modelling and Laplace approximation performed in the multiple imputations phase. It provides insights for maximising the impact of the innovations implemented in PISA while minimising the risk of impairing the reliability and the validity of the assessments, which is essential for maintaining technically sound international assessments. Based on the theoretical considerations, the scale robustness of PISA is confirmed against the growing number of countries/economies; nevertheless, the importance of assessing the model-data fit and investigating residual structures by sub-populations are indicated in this study. Furthermore, analysis procedures for nuisance factors such as testlet effect and locally dependent items are introduced in this paper. In summary, this study provides the theoretical considerations underpinning the stability and extensibility of the PISA scale.

Recalling the centrality of transport infrastructure in any development strategy and economic recovery and resilience plan, the paper stresses the importance of increasing territorial connectivity in Colombia to sustain future progress. It describes the variety of financing models for transport infrastructure in the country and globally and identifies five key factors that Colombia should take into account when choosing between models in the future.

Korea’s low youth employment rate has negative consequences for the young people concerned and the economy as a whole. Raising youth employment is a priority, particularly as Korea faces the most rapid population ageing among OECD countries. Low youth employment is due to a mismatch between education and the labour market, reflecting a large skill gap between highly-educated youth who race for credentials to secure attractive careers and older workers retiring from jobs that require less human capital. The share of university graduates among young Koreans is the highest in the OECD, but their employment rate is relatively low even as small firms confront serious labour shortages. Dualism in the labour market (between regular and non-regular workers) and the product market (between small and large firms) encourages young people to queue for jobs in large firms and the public sector to avoid low-wage precarious jobs. Raising the youth employment rate requires breaking down dualism while reforming the education system. Vocational education in secondary schools, which has shrunk while becoming another route to tertiary education, should be improved to make it a direct path to employment. Expanding the approach of Meister schools and the work-learning dual programme would help in that regard. Tertiary education should become more flexible and responsive to the demands of employers. Active labour market policies should focus less on direct job creation and more on job placement and training.

  • 15 Dec 2022
  • Florianne Tschudi-Monnet, Marie-Gabrielle Zurich, Carolina Nunes, Jenny Sandström, Rex FitzGerald, Michael Aschner, Joao Rocha
  • Pages: 190

This Adverse Outcome Pathway (AOP) describes the linkage between binding to proteins involved in protection against oxidative stress and impairment in learning and memory. Production, binding and degradation of Reactive Oxygen Radicals are tightly regulated in the body, and an imbalance between production and protection may cause oxidative stress, which is common to many toxicity pathways. Oxidative stress may lead to an imbalance in glutamate neurotransmission, which is involved in learning and memory. Oxidative stress may also cause cellular injury and death. During brain development and in particular during the establishment of neuronal connections and networks, such perturbations may lead to functional impairment in learning and memory. The weight-of-evidence supporting the relationship between the key events described in this AOP is based mainly on developmental effects observed after an exposure to mercury, a heavy metal known for its strong affinity to many proteins having anti-oxidant properties. This AOP is referred to as AOP 17 in the Collaborative Adverse Outcome Pathway Wiki (AOP-Wiki).

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