Boosting productivity in Switzerland

Abstract

Swiss GDP per capita stands amongst the top OECD performers. However, to face medium-term challenges productivity developments will be key to allow the country to maintain its enviable position. Recent trends have not been favourable, with productivity growth underperforming peer countries. Based on macroeconomic analysis and supported by firm-level data, results point to a significant role for competition, innovation, education, firm characteristics and entrepreneurship. The regulatory environment is a crucial element driving productivity and could explain some of the differences across cantons. It is also an important factor for productivity differences across sectors. Other issues weighing on Switzerland’s future performance include risks from ageing, which can have major consequences on productivity via its influence on economic sectors and also via the age structure and the evolution of productivity through working life. Fully utilising the potential of underrepresented population segments would also be beneficial, notably encouraging full-time participation of women and better integrating immigrants. More enterprise creation could be achieved with increased entrepreneurship education, expanded non-bank financing and a reduced regulatory burden. R&D, while an obvious success in Switzerland, has apparently not produced commensurate returns in output. Diversification, more knowledge sharing, a stronger role for higher education institutions and promotion of start-ups would help reinforce the links from R&D to productivity. This Working Paper relates to the 2017 OECD Economic Survey of Switzerland (www.oecd.org/eco/surveys/economic-survey-switzerland.htm).