Publications & Documents

The paper contributes to renewed debates about industrial policy in the context of recent initiatives in several OECD economies. It discusses the pros and cons of industrial policies motivated by environmental, national security and place-based/inclusiveness objectives. The paper also considers implementation and design issues, and how to respond to industrial policies in foreign countries. Despite well-grounded economic, social and environmental justifications for some industrial policies, there are legitimate concerns that the benefits of some of these policies could be limited and the costs high. This mainly relates to measures curbing competition and the practical and political challenges in designing and implementing effective measures. Thus, while governments may want to experiment with future and welfare-oriented industrial policies, they should exert moderation in scope, exercise caution in design and implementation, and be mindful of possible negative international implications.

This paper investigates the link between gender diversity in senior management and firm-level productivity. For this purpose, it constructs a novel cross-country dataset with information on firms’ senior management group and other firm characteristics, covering both publicly listed and unlisted firms in manufacturing and non-financial market services across nine OECD countries. The main result from the analysis is that productivity gains from increasing gender diversity in senior management are highest among firms with low initial diversity. Increasing the female share to the sample average of 20% in firms with initially lower shares would increase aggregate productivity by around 0.6%. This suggests that improving women’s access to senior management positions matters not only for equity but could yield significant productivity gains.

Raising productivity growth is central to closing the gap with the incomes and well-being enjoyed in many OECD countries. Croatia has internationally competitive firms, and a dynamic economy with many young and potentially productive firms. However, overall performance has been limited by the presence of many less productive firms and more productive firms that often fail to grow. This likely reflects a business environment that weakens competitive pressures and makes investments more costly and risky. Reducing the burdens of lengthy and unpredictable regulatory procedures, resolving legal disputes faster with a more efficient judicial system, and improving public sector integrity, will be key for boosting productivity growth. Developing public equity markets and expanding R&D support would improve access to finance for young and innovative firms. State-owned enterprises play a comparatively large role in Croatia’s economy but tend to underperform financially and in delivering goods and services. Improving their governance, by strengthening the state’s oversight and governance arrangements, can improve outcomes. This Working Paper relates to the 2023 OECD Economic Survey of Croatia.

Croatia’s labour market has made important progress over the past decade. Employment rates are rising, reducing the gap with OECD countries, and poverty has fallen. While important weaknesses remain, many dimensions of equity and working conditions are similar to OECD countries. Continuing this progress is essential for Croatia’s incomes and well-being to converge with OECD countries, to counter accelerating population ageing and to make the most of emerging opportunities, including from digitalisation and the green economy transition. For employers, filling increasingly advanced skill needs is a growing obstacle. Relatively few of the young and older adults are in work – contributing to weakening skills, lower incomes and higher poverty risks. Addressing these challenges will require dramatically expanding participation in re-skilling and adult education programmes, and raising the workforce’s flexibility, for example by strengthening active labour market policies, improving the housing market’s dynamism and making the most of immigrants’ and returned emigrants’ skills. This Working Paper relates to the 2023 OECD Economic Survey of Croatia.

Using data on more than 150.000 non-financial companies operating in both manufacturing and services sectors around the world, we analyse the drivers of firm performance throughout the whole COVID cycle (until end 2021). We highlight three key results. First, if anything, larger and older firms did worse than smaller and younger ones in terms of revenues and investment spending, both during COVID-19 and the subsequent recovery. Even in sectors that were under scrutiny from a competition standpoint, such as technology and healthcare, larger firms did not systematically over-perform. Second, ex-ante financial strength attenuated the effects of the shock on revenues during the COVID cycle. Third, there is some evidence of debt overhang: firms that entered the crisis with a higher leverage ratio invested less than others, including on R&D, both in 2020 and in 2021, while firms that became more debt-burdened during the pandemic tended to record weaker investment spending during the recovery. These insights shed light on market power, competition, and more generally on the performance of the corporate sector since the start of COVID-19 pandemic.

This paper describes an algorithm, 'DoomBot', which selects parsimonious models to predict downturns over different quarterly horizons covering the ensuing two years for 20 OECD countries. The models are country- and horizon-specific and are automatically updated as the estimation sample period is extended, so facilitating out-of-sample evaluation of the algorithm. A limited combination of explanatory variables is chosen from a much larger pool of potential variables that include those that have been most useful in predicting downturns in previous OECD work. The most frequently selected variables are financial variables, especially those relating to credit and house prices, but also include equity prices and various measures of interest rates (such as the slope of the yield curve). Business cycle variables -- survey measure of capacity utilisation, industrial production, GDP and unemployment -- are also selected, but more frequently at very short horizons. The variables selected do not just relate to the domestic economy of the country being considered, but also international aggregates, consistent with findings from previous OECD work. The in-sample fit of the models is very good on standard performance metrics, although the out-of-sample performance is less impressive. The models do, however, provide a clear out-of-sample early warning of the Global Financial Crisis (GFC), especially when considered collectively, although they do generate ‘false alarms’ just ahead of the crisis. The models are less good at predicting the euro area crisis out-of-sample, but it is clear from the evolution of the choice of variables that the algorithm learns from this episode, for example through the more frequent selection of a variable measuring euro area sovereign bond spreads. The latest out-of-sample predictions made in mid-2023, suggest the probability of a downturn is at its greatest and most widespread since the GFC, with the largest contributions to such risks coming from house prices, interest rate developments (as measured by the slope of the yield curve and the rapidity of the change in short rates) and oil prices. On the other hand, warning signals from business cycle variables and equity prices, which are often good downturn predictors at short horizons, are conspicuously absent.

The Turkish economy grew strongly over the past two decades and created many jobs. However, given its young and growing workforce, Türkiye needs to ramp up efforts to achieve high-quality formal job creation. A sizeable share of the workforce, mostly female workers, does not actively participate in the labour market. While informality has decreased significantly, it is still widespread and entrenches productivity differences across firms. Rigid labour market rules, particularly the high severance pay but also minimum wages, impede formal job creation. More flexible labour markets should be part of a comprehensive reform programme that shifts job loss protection to a broader-based unemployment insurance scheme, supported by well-designed activation policies. While educational attainment has risen impressively, a growing number of vacancies, significant skill mismatches and a low level of adult skills highlight the need to address the quality of education and to improve on the matching of talent to jobs.

The Government of Australia has made improving gender equality one of its core priorities, recognising the potential social and economic benefits that it can bring. This OECD Review assists Australia in embedding gender considerations in policy and budget decisions. It draws upon best practices across OECD countries and sets out a series of actions to enable the federal government to strengthen gender impact assessments and gender budgeting. This will help target government policy and resources towards better and fairer social and economic outcomes.

Thailand has achieved remarkable economic progress over the past decades. A strong and timely policy response helped to cushion the economic and social impact of the pandemic, and of high energy and food prices. While bold fiscal support prevented the economy from falling into a recession, public debt has risen and fiscal consolidation should now continue at a gradual pace. Rising social demands, population ageing and the green transition will likely add to public spending pressures and call for raising additional tax revenues. Boosting productivity and mastering the transition towards more sustainable and inclusive growth will require stepping up delayed structural reforms. Competition remains limited across several sectors, likely related to market entry barriers and high regulatory burdens. More than half of workers lack formal employment and social security does not cover most of them. Social pensions provide a minimum income floor for elderly people, and raising them could allow significant inroads in the fight against poverty and inequality. Meeting climate pledges will require bold and well-organised reforms. Renewable power generation has advanced, but the overall share of renewable energy sources remains lower than in peer countries. SPECIAL FEATURES: BOOSTING PRODUCTIVITY; INCLUSIVE RECOVERY; GREEN GROWTH