Download to read offline
Uploaded byOECD_Inclusivegrowth
2013.11.15_OECD-ECLAC Regional Consultation_alain de serres
This document discusses a framework for linking policies to living standards through inclusive growth. It proposes that the framework should provide a clear link between dimensions of welfare (like income, health, education) and policies, identify transmission channels, and make policy tradeoffs explicit while being adaptable. The framework models welfare as outcomes of a production function influenced by policies. The document then examines how specific policies influence key outcomes like income generation, health, and income distribution for different countries.
More Related Content
Similar to 2013.11.15_OECD-ECLAC Regional Consultation_alain de serres
More from OECD_Inclusivegrowth
2013.11.15_OECD-ECLAC Regional Consultation_alain de serres
- 1. Inclusive Growth: Aframework for linking living standards to policies Alain de Serres OECD Economics Department 15 November 2013 ECLAC-OECD joint workshop Santiago, Chile
- 2. 2 IG: Frameworkfor linking to policies What the policy framework should aim to achieve 1. Provide a clear link between individual dimensions of the welfare function and policies 2. Identify the main channels of transmission 3. Make explicit the main policy trade-offs and synergies 4. Be sufficiently flexible to be adaptable to country-specific challenges and circumstances
- 3. 3 IG :Framework for linking to policies A framework for policy analysis Welfare function depending on outcomes Outcomes and their distribution: Material well-being: Income, consumption jobs Quality of life: Health Education Personal Security Env. quality of life … Production function or process Policies Economic Financial Competition Labour Social Health policies Education policies Return on physical and human capital, demand for jobs … Other drivers (institutions; norms; exogenous factors) Sources of growth, equality of opportunities Going for Growth / Green growth / Divided we stand Work on education and health etc. Work on side-effects of growth policies Work on equality of outcomes and opportunities
- 4. 4 IG :Framework for linking to policies Linking outcomes to policies requires that a number of related conditions be fulfilled 1. A good understanding of the key drivers of the outcomes in the welfare function is critical Firm link to policies requires that processes generating outcomes be well understood and defined Supported by analytical framework 2. The identification of robust empirical relationships between living standards and policies is also important Could be more difficult for quality-of-life aspects of certain dimensions (e.g. environment) Constraint of data availability over time and across countries 3. The amenability of outcomes to policy instruments will also determine the choice of variables Estimated economic impact must be significant
- 5. 5 IG: Framework The case of income and health status 1. Income generation (material living standards) Measured by mean household disposable income… … but link to policies anchored in growth accounting framework (drivers of GDP per capita) 2. Health status (non-material dimension) Proxied by life expectancy Matters for both material and non-material living standards 3. Income distribution How aggregate income trickles down across various parts of the distribution Mean, median, lower part of the distribution
- 6. 6 IG: Framework 1. Income generation (material living standards)
- 7. 7 OECD average Lower half of OECD IG : Income generation Large differences in GDP per capita in middle-income countries are mostly accounted for by productivity gaps Russia Chile Mexico Turkey Brazil South Africa China Indonesia Except for Turkey and South Africa. Percentage difference in labour productivity3 Percentage GDP per capita difference compared with upper half of OECD countries1 Percentage difference in labour resource utilisation2 -100 -80 -60 -40 -20 0 20 India countries -100 -80 -60 -40 -20 0 20 -100 -80 -60 -40 -20 0 20 OECD average Lower half of OECD Russia Chile Mexico Turkey Brazil South Africa China Indonesia India countries 2012 2008
- 8. 8 IG :Income generation Convergence in productivity levels has been uneven over the last decade Average growth in GDP per hour over 2001-11 against level in USA NOR POL PRT SVK SVN GBR ESP SWE CHE TUR Productivity growth could be higher in some countries considering the 11 10 9 8 7 6 5 4 3 2 1 scope for catching up 2001 AUS AUT BEL CAN CHL CZE DNK EST FIN FRA DEU GRC HUN ISL IRL ISR ITA JPN KOR MEX NZL NLD LUX RUS BRA CHN IND IDN ZAF EU 0 0 2.5 5 7.5 10 12.5 15 17.5 20 22.5 25 27.5 30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 Level, US dollars, 2001 Average of growth rates, 2001-11 OECD average OECD average
- 9. 9 IG: Incomegeneration Labour utilisation is generally high but so is informality Share of persons in informal employment in total non-agricultural employment, 2009 Russia² Chile³ Turkey South Africa Brazil Mexico Indonesia India Per cent Tackling informality would be good for growth (human capital 90 80 70 60 50 40 30 20 10 0 development and productivity) and inclusiveness (income prospects)
- 10. 10 IG :Income generation Low female participation limits labour force participation in some LACs Per cent Particularly low relative to total participation in Mexico, Turkey but 90 80 70 60 50 40 30 20 10 also low in Chile. Labour force participation rates, 2011 0 Women Total
- 11. 11 IG :Income generation Quality and equity of education are also fundamental for inclusive growth Strength of the relationship between performance and socio-economic background above the OECD average impact Strength of the relationship between performance and socio-economic background not statistically significantly different from the OECD average impact Strength of the relationship between performance and socio-economic background below the OECD average impact Shanghai-China United States Above-average reading performance Above-average impact of socio-economic background Germany Turkey Chile Argentina United Kingdom France Brazil Portugal Spain Mexico Australia Japan Italy Finland Canada Korea Indonesia 600 550 500 450 400 350 300 30 25 20 15 10 5 0 Mean score, OECD average = 500 Percentage of variance in performance explained by the PISA index of economic, social and cultural status (r-squared x 100) Above-average reading performance Below-average impact of socio-economic background Below-average reading performance Below-average impact of socio-economic background Below-average reading performance Above-average impact of socio-economic background OECD
- 12. 12 IG :Income generation Income generation: The policy determinants of GDP per capita GDP per capita Labour Productivity Employment Geography Knowledge-based capital Physical capital Life expectancy Innovation policies Product and financial market policies Framework conditions and institutions Human capital Education policies Labour market policies Basic growth framework anchored in production function approach has allowed for multiple policy channels to be explored and identified
- 13. 13 IG: Framework 2. Health outcomes (non-material dimension)
- 14. 14 IG :Health and life expectancy Life expectancy: Substantial improvement in EMEs 1.1.1. Life expectancy at birth, 2009 (or nearest year), and years gained since 1960 Life expectancy at birth, 2009 Years gained, 1960-2009 Japan Sw itzerland Italy Spain Australia Israel Iceland Sw eden France Norw ay New Zealand Canada Luxembourg Netherlands Austria United Kingdom Germany Greece Korea Belgium Finland Ireland Portugal OECD Denmark Slovenia Chile United States Czech Republic Poland Mexico Estonia Slovak Republic Hungary Turkey China Brazil Vast majority of OECD countries experienced a significant reduction in Indonesia the ratio of bottom to middle incomes Russian Fed. amid diverging trends in overall India income inequality South Af rica 83.0 82.3 81.8 81.8 81.6 81.6 81.5 81.4 81.0 81.0 80.8 80.7 80.7 80.6 80.4 80.4 80.3 80.3 80.3 80.0 80.0 80.0 79.5 79.5 79.0 79.0 78.4 78.2 77.3 75.8 75.3 75.0 75.0 74.0 73.8 73.3 72.6 71.2 68.7 64.1 51.7 90 80 70 60 50 40 Years 15.2 10.9 12.0 12.0 10.7 9.9 8.6 8.3 10.7 7.2 9.7 9.4 11.3 7.1 11.7 9.6 11.2 10.4 27.9 10.2 11.0 10.0 15.6 11.2 6.6 10.5 21.4 8.3 6.7 8.0 17.8 6.5 4.4 6.0 25.5 26.7 18.1 30.0 0.0 21.7 2.6 0 5 10 15 20 25 30 Years
- 15. 15 IG :Health and life expectancy Health status the policy determinants of health outcomes Health care provisions Pollution Life Expectancy Education Life style Environmental policies Production activites (pro-growth policies) Educational policies Health policies: Spending Efficiency Household income Missing determinants such as poverty, exclusion, discrimination and job insecurity. Less of a problem if they correlate with income inequality
- 16. 16 IG: Framework 3. Income distribution
- 17. 17 IG :Income distribution Chile and Mexico saw notable contractions in inequality (Gini coefficient) Changes in inequality against initial level, mid-1990s to late 2000s AUS AUT CAN FRA LUX JPN BEL DEU CZE FIN DNK IRL GRC HUN ITA Change 0.075 0.05 0.025 0 -0.025 -0.05 -0.075 A. Inequality OECD countries have experienced what could be referred to as a form of cross-country “convergence” MEX NLD NZL NOR ESP PRT SWE TUR GBR USA CHL ISR -0.1 0.2 0.225 0.25 0.275 0.3 0.325 0.35 0.375 0.4 0.425 0.45 0.475 0.5 0.525 0.55 Initial level Correlation coefficient= -0.76
- 18. 18 IG :Income distribution Income distribution: Beyond the Gini Chile has done better in the lower half of the distribution A. Developments in the lower half of the income distribution and in "overall" inequality DNK FIN AUT AUS ''Overall'' income inequality Increased overall inequality but decreased inequality in the lower half of the income distribution BEL CAN FRA DEU LUX NOR IRL CZE GRC GBR NLD HUN ITA JPN NZL MEX PRT ESP SWE TUR USA CHL Increased overall inequality as well as in the lower half of the income distribution ISR 0.1 0.08 0.06 0.04 0.02 0 -0.02 -0.04 -0.06 -0.08 -0.1 Decreased overall inequality but increased inequality in the lower half of the income Decreased overall inequality as well as in the lower half of the income distribution -0.3 -0.25 -0.2 -0.15 -0.1 -0.05 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5 0.55 0.6 0.65 0.7 Inequality in the lower half of the income distribution Vast majority of OECD countries experienced a significant reduction in the ratio of bottom to middle incomes amid diverging trends in overall income inequality
- 19. 19 IG :Income distribution Mild decline in the Gini in Spain but falling income at the low end of the distribution Growth in income standards between the mid-1990s and late-2000s Percentage growth of income standard 100 90 80 70 60 50 40 30 20 10 0 -10 Mean income -10 -8 -6 -4 -2 0 2 4 6 8 10 12 Bottom to top-sensitive income standards Relative advantage for the middle class, combined with losses for the poor in absolute terms
- 20. 20 IG :Income distribution Important to understand how GDP per capita trickles HH incomes at different point of the distribution Real annual growth rates in GDP, mean and median income Mean and median incomes have in many countries lagged GDP growth 6 5.5 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 during the pre-crisis period 6 5.5 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 -0.5 -0.5 B. Mid 90s-20071 Median income Mean income GDP per capita
- 21. 21 IG :Framework Linking policies to outcomes: The case of household income and life expectancy Living standards Household Income Life Expectancy Mean Median Bottom Income distribution GDP per capita Income generation Moving from GDP to household income is not a problem from a measurement perspective but less straightforward from the point of view of linking to policies to incomes
- 22. 22 IG: Framework Potential policy trade-offs 1. Growth policies May raise incomes for a majority but also entail higher air or water pollution : unclear net effect health and living standards 2. Environmental policies May lower GDP per capita and household disposable income but still improve living standards through better health 3. Health policies Higher spending on health can raise life expectancy but could also crowd-out other types of public or private investment (or consumption) Higher life expectancy may lead to higher employment and GDP but only if working life is adjusted in proportion
- 23. 23 IG :Growth policies Growth policy priorities for Brazil, Chile and Mexico Brazil Chile Mexico Enhance outcomes and equity in education (X) X X X Ease EPL for regular workers (X) / extend UI benefits (Y) X / Y X Lower labour tax wedge (X) X Promote labour force participation of women (X) / older workers (Y) Y X Lower barriers to entry and competition (X) / investment in infrastructure (Y) / to FDI (Z) X / Y X / Z Strengthen competition law X Improve efficiency of financial markets X Improve rule of law X
- 24. 24 IG: Framework Thank you !