OECD Governments Research Articles

Will OECD Governments Avoid the Path Towards a New Credit War?

AbstractAfter 50 years of successfully avoiding a costly credit war, OECD governments find themselves back at a “race to the bottom” crossroad. Will OECD governments succeed in maintaining a level playing field? Or will the allure of promoting national interests in this new world order with new global political priorities, increasing competition and a complex globalized world lead governments to restart a race to the bottom and ultimately towards a new credit war? To avoid the path towards a credit war not seen since the 1970s, a renewed commitment is required. Securing a level playing field for OECD exporters and business should have high‐level political priority. The OECD Arrangement for export credits is in need of modernization, but governments must also recognize that securing a level playing field in terms of government financing goes beyond export credits and export finance. Official government involvement in international finance can be trade distortive regardless of the primary purpose of financing. A whole‐of‐government approach to the provision of official international financing, regardless of whether the primary purpose of financing is exports, development or climate, is necessary if OECD governments wish to avoid starting down a costly and destructive path.

Environmental regulation and green productivity growth: Empirical evidence on the Porter Hypothesis from OECD industrial sectors

Green growth has become an important development strategy for OECD countries and governments have correspondingly implemented various environmental regulation policies, whereas few studies have discussed the impacts of environmental regulation on green productivity growth in OECD countries. Based on a panel data of OECD countries' industrial sectors, this study analyzes the stringency of environmental regulation policies and measures green productivity growth using an extended SBM-DDF approach. The dynamic panel regression investigates the impacts and mechanism of environmental policy stringency on green productivity growth in OECD countries’ industrial sectors. The main results are: (i) Porter hypothesis is validated that the environmental policy has a positive impact on green productivity growth within a certain level of stringency (lower than 3.08); (ii) The impact turns to be adverse when the environmental regulation policy is stringent over a certain level, as the compliance cost effect is higher than innovation offset effect. The findings provide new empirical evidence for the strong version of the Porter Hypothesis and some implications for OECD countries to further promote green growth.

Research and Implications on OECD Governments’ Procurement Policy to Promote Technology Innovation

Government procurement has great advantages in reducing the uncertainty of innovation, expanding the demand for innovative products, making up for the positive externalities of innovation, and improving the quality of public services, which can directly promote innovation. The use of government procurement to promote innovation is a common practice in many OECD countries. These countries have developed legal or policy tools to ensure that government procurement fully promotes innovation, and integrate innovation goals with other policy goals to better address social challenges. However, in recent years, China has not attached importance to the role of government procurement in promoting innovation, which is not conducive to the development of innovation. By learning from the experience of OECD countries, China should restore and improve the policy design to make it more operable and integrate the goal of promoting innovation into other social goals.

Better Off? Distributional Comparisons for Ordinal Data About Personal Well-Being

How to undertake distributional comparisons when personal well-being is measured using income is well-established. But what if personal well-being is measured using subjective well-being indicators such as life satisfaction or self-assessed health status? Has average well-being increased or well-being inequality decreased? How does the distribution of well-being in New Zealand compare with that in Australia, or between young and old people in New Zealand? This paper addresses questions such as these, stimulated by the increasing weight put on subjective well-being measures by international agencies such as the OECD and national governments including New Zealand's. The paper reviews the methods appropriate for distributional comparisons in the ordinal data context, comparing them with those routinely used for comparisons of income distributions. The methods are illustrated using data from the World Values Survey.

The Golden Age of Tax Expenditures: Fiscal Welfare and Inequality in Portugal (1989–2011)

ABSTRACTThis paper studies social tax expenditures as an instrument of social policy, considering its broader social and political ramifications, particularly regressive distributive impacts, the targeting of social protection and making markets for non-state providers. Using OECD data and government budgets, we look at ‘tax breaks for social purposes’ in Portugal since the 1980s, with a focus on healthcare, educational and mortgage loan expenses. Portugal presents a comparatively high level of TBSP before the Great Recession. Why? Using Portugal as a theory-developing case, the paper argues that in the critical juncture following the late, double transition to democracy and structural economic reform, tax and welfare state developments combined to create social tax expenditures as a modality of targeted social expenditure favouring middle and higher strata. Once in place, a combination of powerful vested interests, obscure policy-making, regressive income distribution and high take-up rate across taxpaying groups obtained a path-dependent outcome, keeping inegalitarian and costly fiscal welfare growing during adverse fiscal conditions. Such a resilient outcome was curbed only in 2011 by the harsh conditionality of the economic and financial adjustment programme of the Portuguese bailout, an instance of how deep crises provide opportunities for path-shifting reconfigurations of social policy.

Is there a ‘pig cycle’ in the labour supply of doctors? How training and immigration policies respond to physician shortages

Many OECD countries are faced with the considerable challenge of a physician shortage. This paper investigates the strategies that OECD governments adopt and determines whether these policies effectively address these medical shortages. Due to the amount of time medical training requires, it takes longer for an expansion in medical school capacity to have an effect than the recruitment of foreign-trained physicians. Using data obtained from the OECD (2014) and Bhargava et al. (2011), we constructed a unique country-level panel dataset that includes annual data for 17 OECD countries on physician shortages, the number of medical school graduates and immigration and emigration rates from 1991 to 2004. By calculating panel fixed-effect estimates, we find that after a period of medical shortages, OECD governments produce more medical graduates in the long run but in the short term, they primarily recruit from abroad; however, at the same time, certain practising physicians choose to emigrate. Simulation results show the limits of recruiting only abroad in the long term but also highlight its appropriateness for the short term when there is a recurrent cycle of shortages/surpluses in the labour supply of physicians (pig cycle theory).

International Aspects of the Australian Goods and Services Tax (GST)

Written in June 2000 at the introduction of Australia's Goods and Services Tax (GST) this paper suggests that the Australian GST is an inefficient and inequitable tax which will not meet the expectations of the Howard Liberal Government. This paper seeks to question why the Australian Government was so determined to establish a broad based Goods and Services Tax and what is the likely outcome given the experiences of other nations when they have implemented a GST/VAT system. The growth of e-commerce is a major thrust for world governments to align tax policies and GST/VAT is seen as one of the tools by which this uniformity can be achieved. It is argued that the Australian Government is therefore being pressured by fellow OECD governments to conform to their taxation policies. Pressures of globalisation are intensifying the need to conform to remain internationally competitive. This paper examines the international aspects of Australia’s tax legislation, using the GST/VAT as an example. The GST/VAT provisions proposed in 2000 for Australia in light of foreign government’s experience will also be examined. The need for a GST/VAT and the Australian Government’s drive for its implementation is also analysed. An international comparison of the Australian GST provisions with the Cook Islands VAT system will be undertaken in the paper. The purpose of the comparison will be to demonstrate the international ramifications of consumption-based taxation to the Australian taxpayer when viewed from a global point of view. Also, the comparison will look at the comparative position of an Australian taxpayer compared with other taxpayers in the world and how they interrelate. Given the major political, social and economic differences that tax havens in the South Pacific and the OECD conforming Australian Government, it is submitted that this examination will produce a real distinction between the two international extremes and thereby elucidate likely problems which will be experienced in the Australian context. The comparisons and distinctions will be highlighted to produce the extremes of the international tax continuum as part of the study of international taxing systems. The differences in the two approaches will be placed in context of their respective effectiveness. The comparisons will also provide an insight into international taxing relations and their effectiveness in achieving their purpose i.e. to maximise government revenue with the minimum disruption to taxpayers. As a result of the comparison and likely problems that will be encountered in the Australian context, the paper concludes by putting forward various alternatives and solutions to the identified problems. While the paper appears out of date some 17 years later it makes a very interesting base for the comparisons of what actually happened. It appears those outcomes were very close to the 2000 predictions.

Portfolio Similarity and International Development Aid

How do governments distribute their foreign aid resources across international development organizations (IDO)? We argue that governments’ distributional choices across IDOs derive from their attempt to minimize the costs of delegation and to pursue their own interests in foreign aid policy. Governments make decisions about the allocation of resources across a large number of IDOs, and they delegate their scarce aid resources to IDOs that pursue development policies in line with their own foreign development interests. We use data on the financial contributions of 22 OECD governments to 12 IDOs from 1970 to 2008 to test our argument. We find strong support for our claims. Governments regularly contribute to a large number of IDOs, and they tend to delegate more resources to IDOs that provide higher levels of portfolio similarity. The findings suggest that governments can benefit from the increasing complexity of the system of international organizations. It allows them to minimize the loss of control they experience when delegating sovereignty to international organizations.

Demanding Activation

AbstractThe distinctive character of the unemployment policies overhaul, known as the ‘activation turn’ of the 1990s, was that OECD governments intensified coercion against unemployed individuals while relaxing their commitment to ensuring full employment. By now supply-side activation policies have been tested long enough to permit conclusive evaluations, and the article surveys the body of empirical assessments to determine the achievements of the activation turn. The implementation of welfare-to-work policies has not resulted in bringing down the rates of unemployment (independently of the business cycle), combating long-term unemployment, reducing (in-work) poverty or empowering jobseekers as consumers of public services, which were all goals of the reformed ‘activating state’. Instead, activation has been working as a mechanism of entrapment at the margins of liberalised labour markets by dint of its complementarity with employer-centred flexibility. The activation turn has thus failed to achieve its direct labour market and social objectives. However, it has produced pronounced indirect negative effects in the labour market, and its social impact has been regressive and repressive, as anticipated in normative and political-economic critiques of the rising ‘workfare state’.

Are Unemployment Rates in OECD Countries Stationary? Evidence from Univariate and Panel Unit Root Tests

This paper revisits the dynamics of unemployment rate for 29 OECD countries over the period of 1980-2013. Numerous empirical studies of the dynamics of unemployment rate are carried out within a linear framework. However, unemployment rate can show nonlinear behaviour as a result of business cycles or some idiosyncratic factors specific to labour market (Cancelo, 2007). Thus, as a testing strategy we first perform Harvey et al. (2008) linearity unit root test and then apply the newly ESTAR nonlinear unit root test suggested by Kruse (2011). This test has higher power than conventional unit root tests when time series exhibits nonlinear behaviour. Our empirical findings provide significant evidence in favour of unemployment rate stationarity for 25 countries. For robustness purpose, we have also used panel unit root tests without and with structural breaks. The results show that unemployment hysteresis hypothesis is strongly rejected when taking into account the cross-sectional and structural break assumptions. Thus, unemployment rates are expected to return back to their natural levels without executing any costly macroeconomic labour market policies by the OECD's governments.

Institutional long-term care and government regulation

The demand for institutional long-term care is likely to remain high in OECD countries, because of longer life expectancy and falling cohabitation rates of the elderly with family members. As shortages of qualified nurses put a cap on the supply of beds at nursing homes, excess demand builds. That puts upward pressure on prices, which may not reflect the quality of the services that are provided. Monitoring the quality of nursing home services is high on the agenda of OECD governments. Enlisting feedback from family visitors and introducing portable benefits might improve quality at little extra cost.

Communicating Employability: the Role of Communicative Competence for Zimbabwean Highly Skilled Migrants in the UK

Skilled migration is an increasingly important topic for both policy and research internationally. OECD governments in particular are wrestling with tensions between their desire to use skilled migration to be on the winning side in the ‘global war for talent’ and their pandering to and/or attempts to outflank rising xenophobia. One aspect that has received relatively little attention is skilled migration from the African Commonwealth to the UK, a situation in which skilled migrants have relatively high levels of linguistic capital in the language of the host country. We focus here on the case of Zimbabwe. In spite of its popular image as a failed state, Zimbabwe has an exceptionally strong educational tradition and high levels of literacy and fluency in English. Drawing on 20 in-depth interviews of Zimbabwean highly skilled migrants, we explore the specific ways in which the communicative competences of these migrants with high formal levels of English operate in complex ways to shape their employability strategies and outcomes. We offer two main findings: first, that a dichotomy exists between their high level formal linguistic competence and their ability to communicate in less formal interactions, which challenges their employability, at least when they first move to the UK; and second, that they also lack, at least initially, the competence to narrativise their employability in ways that are culturally appropriate in England. Thus, to realise the full potential of their high levels of human capital, they need to learn how to communicate competently in a very different social and occupational milieu. Some have achieved this, but others continue to struggle.

The OECD as Pivot of the Emerging Global Educational Accountability Regime: How Accountable are the Accountants?

Background/ContextPISA has catapulted the OECD—an organization whose mission is the global growth of market economies—to a central role in international education policy making, rivaling and sometimes outdoing the various national governments in influence. While claiming scientific evidence as the basis for the accountability regime it promotes, the policy frameworks and principles it has adopted over the past two decades are rooted in ideas about the superiority of market mechanisms that are contested in many member nations. Yet, while exerting strong influence on national educational practices in pursuit of a narrow and contested policy agenda, it is not easily influenced through established democratic processes.PurposeIn this paper, I discuss key OECD ideological and policy shifts that form the background for PISA. Secondly, I focus on the OECD's governance mechanisms and the obstacles it presents to public scrutiny.Research DesignDrawing on recent scholarship on the power of transnational policy networks to influence national policy through the soft power of epistemic communities, this paper analyzes policy documents and relevant research from OECD and PISA to identify ideological commitments and configurations of power that form the backdrop for PISA.ConclusionI propose that in a world of global policy making, the influence of organizations like the OECD highlights deficits in the constitution of the global democratic public sphere that would foster the accountability of these organizations.

Evaluating the cost of government credit support: the OECD context

Governments throughout the OECD allocate a large share of societies' capital and risk through their credit-related activities. Hence, accurate cost estimates for credit support programmes are a prerequisite for efficient resource allocation, transparency, effective management and public oversight. I find that OECD governments generally take their cost of capital to be their own borrowing rate, rather than using a weighted-average cost of capital that includes the cost of risk borne by taxpayers and the general public in their role as equity holders. That practice, which is institutionalised in government accounting and budgetary rules, results in cost estimates for credit support that are significantly downwardly biased relative to a fair-value metric that recognises the full cost of risk. The size and possible real consequences of those distortions are illustrated with analyses of the European Bank for Reconstruction and Development, the European Stability Mechanism and the Tennessee Valley Authority. — Deborah Lucas

The OECD, PISA and educational governance: a call to critical engagement

In an educational world comprised of seemingly innumerable acronyms, the Organization for Economic Co-operation and Development's (OECD) PISA – the Programme for International Student Assessment – ...

Governance Structure in High-Growth Firms

This paper addresses the structure of governance systems in high-growth firms. We propose that high-growth firms have specific characteristics and challenges that may warrant other governance structures than are recommended in the governance codes. In the present study, we compare a sample of 865 high-growth firms in Norway with a statistically representative sample of 396 SMEs in Norway, on several general characteristics as well as on their governance structures. The findings show that high-growth firms do have specific characteristics that distinguish them from other small and medium sized enterprises. The high-growth firms in our sample are significantly younger and smaller than the average SME, and their growth intentions are significantly stronger. They also face greater difficulties in recruiting sufficient qualified personnel. Further, the high-growth firms differ in their governance structure on several aspects. They have more owners than the average SME, and in 81.4% of the high-growth firms the founder has the three roles of owner, director on the board, and a top management position simultaneously. The results also show that the high-growth firms have significantly different board compositions than the SMEs. The boards in this sample are larger, the proportion of independent directors on the boards is larger, and the boards are more gender diverse (21% women) than in the SME sample. We discuss these findings in light of general OECD governance principles, and whether high-growth firms might represent some best practice examples for SMEs, considering their successful growth histories.

Fiscal forecast errors: Governments versus independent agencies?

We present evidence pointing to the fact that international agencies' fiscal forecasts were affected to some extent by the same type of problems that the literature widely acknowledges for governmental ones. Informational shortages may lead independent agencies' staff to internalize “political biases” in governmental forecasts when trying to grasp genuine “private information”. Our study is based on a real-time database of EC, OECD and national governments' public deficit forecasts for 15 European countries over the period 1999–2007 and four vintages of projections per forecasted year. Against this background, independent national fiscal institutions might be a natural option, to the extent that they may have better access to inside national information than international organizations. Our results also provide some support to policy positions that claim a closer monitoring of official budgetary projections, in particular as regards transparency requisites, accountability and the threat of sanctions.

Government and business: an introduction

This article considers the apparent renewal of interest in interventionist industrial policies among OECD governments—asking just what, if anything, is new—with particular reference to the UK. It outlines the theoretical justifications for such interventions and discusses issues concerning intangibles, innovation, and infrastructure. It describes the special emphasis placed on re-balancing the structure of production, the central role accorded to human capital, and the salience of spatial aspects of policy. It stresses the potential for government and administrative failure just as much as market failure. Copyright 2013, Oxford University Press.

Michael Porter’s cluster theory as a local and regional development tool: The rise and fall of cluster policy in the UK

There has been much written on industrial agglomeration, but it is Michael Porter’s cluster theory, above all others, which has come to dominate local and regional economic development policy. His work has been adopted by the OECD, EU, national and local governments the world over. He and his consultancy group have led reviews of national economic growth strategies in dozens of countries. This rise to prominence, however, is in the face of widespread critique from academics. Cluster theory’s theoretical foundations, its methodological approach and practical implementation have all been unpicked, leading some to label little more than a successful brand riding the wave of new regionalist fashions. Despite libraries of incredibly useful books and articles on clusters, there remains an absence of work which interrogates the translation of clusters into, and then through local and national policy. The aim of this article is to go some way to remedying the situation by examining the influence of Porter’s cluster theory charted through an examination of UK regional development policy in the 1990s and 2000s. To help map the journey of clusters into and through UK economic development policy actor-network theory is adopted as an explanatory framework.

Defense-related R&D as a model for “Grand Challenges” technology policies

National defense represents a significant share of most OECD governments’ R&D budgets and an even higher share of their mission-oriented R&D spending. This public R&D investment has focused on research and innovation supporting defense missions, and in many cases the military services of these governments have purchased weapons systems incorporating the resulting technologies. Defense-related R&D investment has influenced innovation in the broader civilian economy of several OECD nations, including the United States, the United Kingdom, and France. The scope and nature of this influence remains uncertain and subject to considerable debate. Nonetheless, policymakers throughout the industrialized economies have expressed interest in “applying the lessons” of defense-related and other mission-oriented R&D programs to such challenges as climate change. This paper examines the characteristics of defense-related mission R&D programs in the industrial economies, with particular attention to the subset of nations for which reliable longitudinal data on defense R&D spending are available. I highlight the characteristics that distinguish mission-oriented R&D in this field from mission-oriented R&D in other sectors and to point out some significant differences among OECD economies in the structure of their defense-related R&D programs. The discussion also emphasizes the ways in which the unique structure of defense-related R&D limit its utility as a model for mission-oriented R&D programs aimed at other goals.