Nero Meeting: Alain de Serres OECD Economics Department. 21 June 2013

Transcription

1 Nero Meeting: The structural reform agenda to boost longterm growth and its side-effects on nearterm activity and other objectives Alain de Serres OECD Economics Department 21 June 2013

2 Benchmarking exercise to help reflect on structural reforms Five policy priorities for each country to improve living standards through higher productivity and employment Broad range of policy areas covered: Product and labour market regulations Taxation (subsidies) and social protection Education and training (activation) policies Trade and investment rules Innovation policies 2

3 Fostering employment is the main focus of priorities in Europe Emphasis on active labour market and social policies Income support coverage, job-search assistance and training Reforms to foster job creation, hiring and labour mobility, incentives to take-up work Progress achieved through changes in tax and benefit systems, wage bargaining and employment protection legislation Greece, Italy, Portugal and Spain have all made reforms in each of these areas with Greece having gone furthest More needs to be done, including to reduce barriers to entry in services 3

4 Boosting productivity is key to long-term growth: common areas of reforms Reform objectives: Promote investment in skills, technology and infrastructure Facilitate shift in resources from inefficient sectors and firms to more productive ones Policy areas: Reduce regulatory barriers to competition in network industries and services sectors Reform of taxation and phasing out of subsidies (agriculture, housing and fossil-fuel) More efficient provision of public services 4

5 Differences in challenges are reflected in distribution of priorities across policy areas One quarter of priorities concern social benefits in AMEs, while for EMEs the same proportion focuses on product market regulation 5

6 Responsiveness rate, Countries most active at reforming have also consolidated their budget LUX ISR DNK EST AUT FIN NZL NLD CZE GBR ITA CAN AUS HUN KOR FRA JPN USA CHE DEU SWE SVN NORBEL IRL ESP ISL POL SVK PRT GRC Variation in the underlying primary balance as a percentage of potential GDP from 2010 to 2012 Raises concerns about impact of reforms in context of budget retrenchment and weak activity 6

7 Structural reforms can help reduce consolidation needs Especially if boost growth through higher (private) employment A permanent one-percentage point increase in (private-sector) employment can improve the budget balance by between 0.3 and 0.8 percentage points 7

8 Measures that relieve pressure from budget: Pension reform is a good case Change in underlying primary balance needed to bring debt to 60% of GDP in 2060 The baseline includes reforms to keep pension spending constant as a share of GDP The baseline includes no change from current policies JPN GBR USA SVK AUS POL ESP NZL FRA ISR CZE NLD SVN CAN PRT IRL LUX FIN BEL DNK HUN GRC CHE KOR AUT SWE DEU EST NOR ISL 0 The impact on consolidation needs of keeping public pension spending constant as a ratio of GDP 8

9 Product market reforms typically encourage labour force participation Years after the reform ** ** Percentage points ** 0.00 Change in aggregate labour force participation following a typical reform of product market regulation 9

10 Other measures have potential to generate savings but may be ineffective in bad time 2.5 Years after the reform Percentage points "good" times "bad" times -0.5 Change in aggregate employment following a typical reduction in UI benefits 10

11 More reform efforts between CA deficit and surplus countries would help support demand in EA and globally A. Responsiveness to recommendations across OECD countries, Responsiveness rate Responsiveness rate adjusted for the difficulty to undertake reform The European crisis has been a major driver of reform action 11

12 Thank you 12