OECD Membership Research Articles

A global‐scale study on decision making in renewable energy policy: Internal and external factors driving the adoption of Feed‐in Tariffs and Renewable Portfolio Standards

AbstractTo accelerate the clean energy transition, it is necessary to better understand the global policy dynamics and motivations behind clean energy policy adoptions and diffusion. This article examines the differential roles of internal and external diffusion factors on decisions to adopt renewable energy policies, that is, Feed‐In Tariffs (FIT) and Renewable Portfolio Standards (RPS), employing a unique blend of cluster analysis and event history analysis. Cluster analysis uncovers a dichotomy in adopting countries. First, early adopters emerge as high‐income, democratic countries, mostly energy importers with high CO2 emissions, with OECD and EU membership. Conversely, the second cluster consists of adopters from middle‐income, non‐OECD, and non‐EU nations with lower CO2 emissions. Strikingly, these clusters align with UNFCCC party classifications, underscoring the pivotal role of international agreements. Event history analysis suggests that especially environmental pressure, but also democratic governance and economic development are important when adopting renewable energy policies. Interestingly, environmental endowments seem to be less important. These findings lead to an important question: Are the requisite policy tools readily available to navigate diverse socio‐economic, political, and environmental landscapes, and are they deployed in a timely fashion? Beyond these findings, the study also shows that policy diffusion especially through normative emulation and social learning—operationalized as political globalization, OECD member and following regional neighbors—are important for policy adoption, suggesting the importance of such tools for promoting policies. Moreover, distinctive factors come into play when examining the adoption of FIT versus RPS policies, emphasizing the need for nuanced policy approaches.

The effect of forest certification on conservation and sustainable forest management

This study examined the effect of sustainable forest management schemes on forest conservation using remote sensing data on forest change. We applied fixed effect models focusing on two major sustainable forest management schemes: the Forest Stewardship Council and the Programme for the Endorsement of Forest Certification. Contrary to the findings from previous research, the regression results showed that expansion of the sustainable forest management area was uncorrelated with forest loss when controlling for the fixed effects of country and time. These findings were robust to the different definitions of a forest and country groups’ OECD membership. Our estimations suggested that sustainable forest management increased forest loss in non-certified forest areas, indicating the leakage of forest loss from certified to non-certified forest areas. This implies that leakage effects should be considered when implementing forest management or protected forest schemes.

Brazil, the OECD and Transfer Pricing Reform: The Plot Thickens

Brazil’s road to OECD membership has been a long one, and has taken many twists and turns. As that journey finally seems to be reaching a successful finish, Rafael Barbosa de Sousa examines the history of Brazil’s efforts to join the OECD and explains how it has, just maybe, managed to achieve this long-sought-after goal.

The environment comes later: when and how environmental considerations are included in transboundary water agreements

ABSTRACT Until recently, most transboundary water agreements largely focused on utilization, frequently leading to environmental impacts. We examine under which circumstances are environmental considerations included in transboundary water agreements, how are they included and whether they address environmental effects of previous agreements. We analyse 75 treaties, many of which occur within (sub)basins with previously established water agreements. Human water stress, upstream large dams, OECD membership and previous water treaties (particularly those concerning utilization) are the most prevalent conditions where environmental degradation is considered. Our results also suggest that aridity incentivizes negotiating relationships to develop, thereby facilitating environmental water cooperation.

Sustainable development and convergence under energy sector transition in industrial nations: An application of DEA environmental assessment

Environmental protection is important for all nations. For preparing a policy to combat the climate change, we propose a new approach whose assessment is useful for promoting sustainable development and green growth economy. The approach also assesses a technological progress over time, focusing upon pollution reduction. We apply it to 37 OECD countries during 1995–2014, examine performance differences among country groups, and discuss these convergences over the period. Methodologically, we extend the previous study (Sueyoshi and Wang, 2020) that has compared between OECD and Non-OECD nations. It concluded that the former group outperformed the latter group in their environmental measures and club convergence. It is expected that the organization provides member nations with an opportunity to improve the status of green technology for economic growth. Focusing upon OECD nations, this study examines two unified performance measures. The results of this study cannot find their overall convergence. Rather, they are classified into one or two club(s). The results indicate that there are uneven economic and technological progresses between higher and lower groups. The disparity implies that OECD membership does not guarantee uniform green growth and sustainable development for countries. This study also finds that "renewable and nuclear" energy shares are important in maintaining the higher group within OECD because both are zero-carbon emission energy sources.

International trade and standards harmonization: The case of tractors and the OECD Tractor Codes

AbstractAlthough the trade effects of public and private standards—particularly for food safety and environmental quality—in agricultural markets have been well documented, much less is known about standards harmonization and international trade in tractors, a crucial input to agricultural production in most countries. We analyze the trade impacts of the long‐lived OECD Tractor Codes—an integrated system of standardized tractor tests for performance and safety, certification, and mutual recognition agreements established in 1959. We hypothesize that this system increases tractor trade between members and possibly among members and nonmembers because it: (1) reduces duplication of tests across import markets, (2) lowers transaction costs of tractor trade disputes, (3) enhances manufacturers' risk management, and (4) boosts farmer demand through greater trust resulting from intergovernmental organization certification. Using bilateral COMTRADE data for 1962–2018, we estimate a structural gravity equation using Poisson pseudo‐maximum likelihood methods to account for zero trade. After controlling for economic integration agreements and OECD membership, our benchmark analysis suggests trade is roughly one‐third larger if both partners are members, a finding that is robust to considerations of gradual adjustment costs and reverse causality. We further find that this effect varies by countries' timing of accession and, to a lesser extent, level of economic development, though trade creation effects are inconclusive. A counterfactual analysis indicates that manufacturers and farmers in nonmember countries, including several middle‐income and low‐income countries, would benefit from membership. Our results have important implications for standards harmonization and international trade in agricultural machinery.

Market Openness and Its Relationship to Connecting Markets Due to COVID-19

In this research, statistical models were formulated to study the effect of the health crisis arising from COVID-19 in economic markets. Economic markets experience economic crises irrespective of effects corresponding to financial contagion. This investigation was based on a mixed linear regression model that contains both fixed and random effects for the estimation of parameters and a mixed linear regression model corresponding to the generalisation of a linear model using the incorporation of random deviations and used data on the evolution of the international trade of a group of 42 countries, in order to quantify the effect that COVID-19 has had on their trade relationships and considering the average state of trade relationships before the global pandemic was declared and its subsequent effects. To measure, quantify and model the effect of COVID-19 on trade relationships, three main indicators were used: imports, exports and the sum of imports and exports, using six model specifications for the variation in foreign trade as response variables. The results suggest that trade openness, measured through the trade variable, should be modelled with a mixed model, while imports and exports can be modelled with an ordinary linear regression model. The trade relationship between countries with greater economic openness (using imports and exports as a trade variable) has a higher correlation with the country’s health index and its effect on the financial market through its main trading index; the same is true for country risk. However, regarding the association with OECD membership, the relations are only with imports.

In the club: how and why central bankers created a hierarchy of sovereign borrowers, c. 1988–2007

From roughly 1988 to 2007, global banks faced strong regulatory incentives to lend to members of the OECD and those of the IMF’s General Arrangements to Borrow (GAB), along with disincentives to lend to countries that belonged to neither of these groups. The culprit was the Basel Accord, also known as Basel I, a piece of banking regulation designed by the Basel Committee on Banking Supervision (BCBS) to regulate global banks’ capital levels. Why did the BCBS create a ‘club’ of riskless sovereign borrowers, and why did it use OECD and GAB membership to do so? Relying on the archives of the BCBS, I first argue that the Basel Committee chose to design a club in response to European Community (EC) policies, which threatened a number of non-EC states on the Committee. Second, I argue that the BCBS chose to define the group through OECD membership because its members embodied a key set of criteria that it associated with creditworthiness. I conclude by outlining the implications of these findings for our understanding of the BCBS, as well as for our models of how central banks construct international hierarchies.

How do the Banking Systems of High Income Countries differ from others?

In this study, first we look at the relation between countries’ income levels and their banking systems. What are the differences between richer countries and other countries in terms of their banking systems? Then, we look at how OECD membership affects the banking system of a country. When we compare High-Income countries to Middle- and Low-Income countries, we find that workers’ remittances are much higher in Low- and Middle-income countries. The banking industries are much more concentrated in High-Income countries. Bank deposits are also significantly higher in these countries. The banking systems in these countries have more risk compared to their counterparts in other countries. Non-resident banks are more active in High-Income countries. Also, there is more interest in offshore accounts and the banks are more engaged in international transactions. When we compare high-income OECD-member countries to high-income Non-OECD-member countries, we find that the banking industries in high-income Non-OECD-member countries are much more concentrated when compared to their counterparts in High-Income OECD countries. In High-Income Non-OECD countries, non-resident banks are more active and there is more interest in offshore accounts. On the other hand, bank deposits are higher in High-Income OECD countries. But, the banks in these countries are in greater risk compared to the banks in Non-OECD countries (i.e. liquid liabilities are higher). We conclude that policymakers need to consider OECD membership and income level as determinants of a country’s banking system.

The Depth of the Financial System: A Comparison of Developed and Less Developed Countries

This paper summarizes the arguments and counterarguments within the scientific discussion on the issue of how countries’ income levels are related to the depth of their financial system. The main purpose of the research is to determine whether high-income countries have deeper financial systems when compared to other countries. We also examine whether high-income OECD member countries have a deeper financial system when compared to high-income non-OECD member countries. Our contribution is threefold: First, our study has a wider scope than most of the previous studies (i.e. 203 countries in total). Second, we examine both the impact of OECD membership and the actual income level on “depth”. The OECD members and the non-members differ in terms of their cultures, their resources, and their infrastructure, therefore we expect differences between their financial systems. Third, our study goes deeper than most of the previous studies (i.e. we examine twenty different variables on “depth”). The examination of several variables on “depth” allows us to see the dimensions in which one group of countries perform better than the other group. While one group can perform better in certain dimensions of “depth”, the other group can perform better in other dimensions of “depth”. In our empirical analyses, we find that high-income countries tend to have a deeper financial system (in all measures except for “Central bank assets to GDP (%)”) when compared to other countries. When we compare high-income OECD-member countries to high-income non-OECD-member countries, we find that OECD-member countries tend to have a deeper financial system (in most measures). Interestingly, with respect to the two measures, non-OECD-member countries have better “depth” measures. These two measures are “Stock market total value traded to GDP (%)” and “Gross portfolio debt assets to GDP (%)”. Overall, our results indicate that when an economic or financial crisis is expected, middle and low-income countries will be more vulnerable when compared to high-income countries, because in most aspects, their markets are not as deep. On the other hand, high-income countries will be more vulnerable if their Central bank needs to use their assets to protect their system. Similarly, non-OECD members will be more vulnerable when compared to OECD-member countries, because in most aspects, their markets are not as deep. On the other hand, OECD-member countries are weaker with regard to the depth of their stock markets and the number of debt securities held in investment portfolios. Therefore, we can conclude that a country’s income level and OECD-membership should help determine the precautions that policymakers need to take if a crisis is on the horizon. Keywords: depth, financial system, OECD, income level.

Drivers of green bond market growth: The importance of Nationally Determined Contributions to the Paris Agreement and implications for sustainability

Abstract Green bonds are increasingly being applied to finance emissions reductions, sustainable development, and other cleaner production investments conducive to reaching the 2 °C temperature target of the Paris Agreement. As their markets are relatively nascent, there is a gap in the empirical literature on the drivers of green bond market growth. To assess the impact that capital market growth drivers and Nationally Determined Contributions to the Paris Agreement have on green bond issuance volumes as indicators of market growth, this study employed a structural equation model using a panel dataset of over $300 billion in green bonds issued in 49 countries between 2007 and 2017. This is the first econometric study to demonstrate unique drivers of green bond market growth in addition to factors that similarly affect conventional bond market growth. This is also the first study to construct a normalized index of Nationally Determined Contributions robustness scores to measure their impacts on green bond market growth. Macroeconomic latent factors exerted three times the total influence exerted by institutional latent factors. Institutional effects are positive and indirect, while OECD membership impacts were small and statistically insignificant. Nationally Determined Contributions scores exerted the largest positive and statistically significant impacts among observed variables. These results suggest that Nationally Determined Contributions and other macroeconomic and institutional factors are driving growing green bond issuances that will finance climate and sustainability investments through the future. They also highlight the need for broader examinations of the determinants of green bond issuances as investment vehicles for sustainable outcomes.

Determinant Factors for Compressed ERP Education for Stackable Credentialing

This paper presents a case of a collaborative effort between a university, a two-year college, and partners within the Information Technology (IT) and Enterprise Integrated Information Technology including Enterprise Resources Planning (ERP) software companies to address the education and training of the workforce for ERP concentric positions. The courses in ERP that culminate with a certificate are seamlessly integrated into an accelerated associate degree that incorporates prior learning assessment with a competency-based framework. After completing the accelerated associate degree, students can continue the pathway for the bachelor’s degree in information technology on a timeline that is reduced significantly. Data from OECD database that included OECD member countries including USA and selected countries outside the OECD membership was used to analyze factors that enhance training. The data was analyzed to identify important factors for successful training outcomes in compressed delivery format. Furthermore, the forty-one items from the database were factored using component factor analysis. The identified factors augment the Department of Labor competency model for training the workforce for 21st century occupations.

Informing energy consumption uncertainty: an analysis of energy data revisions

Quality energy consumption data are important for many types of analysis, and global data sets estimate trends of county level energy consumption, derived from country reported data and regional reports. We present a novel basis for informing uncertainty in energy data by quantifying the changes in reported energy consumption as countries update their previously reported data. We use 17 editions of the British Petroleum World Energy Statistics (2001–2017) to evaluate how reported energy consumption is revised over time in aggregate coal, oil, and natural gas consumption data. We find that 70% of non-zero data points are adjusted by an average of 1.3% of a country’s total fossil fuel use in the year after their first publication. Earlier data points are revised less often, but almost half of historical trends contain some revisions in later years. The size and rate of data revisions vary over countries and fuels: coal data points have larger, less frequent revisions while oil data points have smaller more frequent revisions, with natural gas in between. A k-means cluster analysis was performed to group together countries with similar revision patterns. These groups span income, economy classification, OECD membership, and regions. Standard country groupings, therefore, do not predict the extent to which a country’s energy data has undergone revisions in the past.

Country note: Brazilian Transfer Pricing Rules: An Analysis of Effectiveness

Brazil is widely recognized as the most significant country that does not follow the international transfer pricing standards. Despite its practicability, there are many evidences that the Brazilian approach is ineffective when it comes to prevent tax avoidance in cross-border transactions. In fact, the predetermined margins combined with the free choice of methods are nothing more than the materialisation of the OECD’s warning against ‘opening avenues for tax planning’. The country’s announced intention of joining the OECD membership is now the great opportunity to amend and improve the current regime.

The Impact of the Asian Crisis on Governance: Does OECD Membership or Income Levels Matter?

Abstract We examine the impact of the 1997 Asian Crisis on governance. We look into how the crisis affected High-Income OECD, High-Income Non-OECD, Upper-middle Income, Lower- Middle Income, and Low Income Countries. For measures of governance, we use the World Bank’s Governance Indicators dataset which includes six measures of governance. We find that pre- and post-crisis, the ranking of each income group has not changed except for year 2004 when the High-Income Non-OECD Countries surpassed the High-Income OECD Countries in “Political Stability and Absence of Violence” category. In other words, our results show that, other than that exception in 2004, both pre- and post-crisis, the High-Income OECD Countries had the best governance measures, the High-Income Non-OECD Countries had the second best measures, and so on, in the order shown above. One point to note here: The High-Income Non- OECD Countries performed much better than the other groups after year 1998. After 1998, this group improved in all six dimensions of governance. We conclude that although crises affect all income groups, because of certain characteristics of the High-Income Non-OECD group, they tend to better react to crises.

Do Sustainable Forest Managements Affect Forest Conservation?

This study examined the effect of sustainable forest management schemes on forest conservation using remote sensing data on forest change. We applied fixed effect models focusing on two major sustainable forest management schemes: the Forest Stewardship Council and the Programme for the Endorsement of Forest Certification. The regression results showed that, contrary to findings from previous research, expansion of the sustainable forest management area was uncorrelated with forest loss when the fixed effects of country and time were controlled. Our findings were robust to different types of forest definition and to country groups restricted by OECD or non-OECD membership. Our estimations suggested that sustainable forest management increased forest loss in non-certified forest areas, indicating the existence of leakage of forest loss from certified to non-certified forest areas. These findings imply that leakage effects should be considered when implementing forest management or protected forest schemes.

Global patterns of current and future road infrastructure

Georeferenced information on road infrastructure is essential for spatial planning, socio-economic assessments and environmental impact analyses. Yet current global road maps are typically outdated or characterized by spatial bias in coverage. In the Global Roads Inventory Project we gathered, harmonized and integrated nearly 60 geospatial datasets on road infrastructure into a global roads dataset. The resulting dataset covers 222 countries and includes over 21 million km of roads, which is two to three times the total length in the currently best available country-based global roads datasets. We then related total road length per country to country area, population density, GDP and OECD membership, resulting in a regression model with adjusted R2 of 0.90, and found that that the highest road densities are associated with densely populated and wealthier countries. Applying our regression model to future population densities and GDP estimates from the Shared Socioeconomic Pathway (SSP) scenarios, we obtained a tentative estimate of 3.0–4.7 million km additional road length for the year 2050. Large increases in road length were projected for developing nations in some of the world’s last remaining wilderness areas, such as the Amazon, the Congo basin and New Guinea. This highlights the need for accurate spatial road datasets to underpin strategic spatial planning in order to reduce the impacts of roads in remaining pristine ecosystems.

Midas’ gift means death: Tax dodging is the biggest obstacle for global justice

Tax havens and tax secrecy have risen to the top of the global policy agenda and may constitute the most important impediment for reducing inequalities. Moreover, complex corporate structures allow charging for services undertaken in various countries through one low-tax country. Transferring profits to low-tax jurisdictions will significantly reduce a multinational corporation’s overall tax burden. Individuals are assisted in opening shell corporations that officially own bank accounts where the real owner (beneficial owner) is not revealed. Reducing this practice of tax dodging (which encompasses both legal tax avoidance and illegal tax evasion) has proven to be difficult, despite substantial efforts by several international organizations and states over the last decade. It is too easy to be removed from the list of tax havens; mere membership in OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes qualifies. Tax dodgers add to global inequalities and severely weaken states’ capacity to undertake their task of creating a solid tax base, embedded in the principle that all actors are taxed according to the income generated in each country. A weak tax base will lead to less trust, more violence and more deaths.
 Keywords: country-by-country reporting, EU, OECD, tax avoidance, tax evasion, tax havens

Consumption-based versus production-based accounting of CO2 emissions: Is there evidence for carbon leakage?

Lately, a controversial debate has evolved regarding consumption-based accounting (CBA) versus production-based accounting (PBA) of CO2 emissions. So far, the debate has been predominately theoretical and has inspired only a few empirical studies. In this article, we compare production-based versus consumption-based emissions, and for the first time analyze reasons for the differences. In particular, we focus on whether there is evidence for carbon leakage from developed to developing countries. We use the newest available data for 110 countries and analyze whether there are differences between OECD and non-OECD members. Furthermore, we compare the within-country differences for the time span of 1997 to 2011 via fixed effects panel regression models in order to investigate whether increases in GDP per capita result in higher imported emissions. The results suggest that for most countries the differences depending on accounting schemes are small. Furthermore, we find no evidence for carbon leakages. In particular, the ratio of CBA to PBA is not driven by OECD membership or GDP per capita. Instead, the ratio is greater for countries with high energy efficiency and high import rates. Given the small differences between PBA and CBA, we suggest keeping the production-based accounting of CO2 emissions.

In search of making a difference: Mexico in the OECD international development co‐operation architecture

AbstractA major challenge for Middle‐Income Countries is to ‘make a difference’ in global issues. The article examines Mexico's compromise in this regard within the OECD international development co‐operation architecture. It highlights some of the footprints of Mexican diplomacy since the OECD membership (1994), through the Working Party on Aid Effectiveness, up to the launch of the Global Partnership for Effective Development Co‐operation (GPEDC), demonstrating how Mexico gradually increased its profile and responsibilities in specific international negotiation frameworks where its dual nature as donor/recipient is precisely contributing to ‘making a difference’. Suggesting that Mexico could expand its South‐South Co‐operation (SSC) even further, the authors argue that Mexico's quest is constrained by a certain consensus on the predominant development paradigm manifested in the GPEDC.