Publications & Documents

A circular economy keeps the value of resources in the economy for longer, extends the useful lifespan of products and reduces waste, thereby reducing environmental and climatic pressures and increasing domestic competitiveness. Italy is among the leading European actors in transitioning to a circular economy. Its adoption of the National Strategy for the Circular Economy in 2022 reinforced the country’s ambition to rapidly shift from linear to circular modes of production and consumption. Among the envisioned measures, the national strategy calls for a stronger use of economic instruments to achieve a more coherent and effective policy mix. This report identifies opportunities for the enhanced use of economic instruments to support the circular economy in Italy. Part I of this report takes stock of the Italian policy landscape, compares it to international practices and recommends seven policy reforms for further consideration. Part II contains an in-depth analysis of three policy instruments that could reduce demand for virgin materials and promote a shift to secondary materials. These instruments include a virgin materials tax on construction minerals, a reduced VAT rate for products with recycled content and corporate tax credits to promote the use of secondary materials.

The increase in human longevity is a major achievement, which brings individual well-being and strong contributions to society, but population ageing also generates challenges. This paper documents demographic trends in OECD countries, highlighting that ageing today largely reflects past fertility, longevity, and migration developments. Policies have moderate or delayed impacts on population ageing, hence they should also focus on adapting to ongoing demographic trends. The paper quantifies ageing’s potential impacts on labour supply and GDP per capita, showing that the extension of working lives as longevity rises could mitigate, but not completely offset, the negative effects of ageing on employment. It also examines how ageing may affect productivity through various micro and macroeconomic mechanisms. Finally, it provides policy directions for addressing the ageing challenge, through supporting healthy ageing, boosting employment, job quality and labour mobility in all age groups, and promoting older workers’ productivity by further developing lifelong learning and fostering an age-friendly management culture.

Housing affordability has deteriorated in the past decade. There is scope for eliminating barriers to expand housing supply by reforming land use policy and streamlining the administration of building permits. Measures can be taken to promote the expansion of the rental market and reform housing taxation to reduce the bias in favour of owner-occupied housing. Ensuring adequate supply and funding for construction and operation of social housing is crucial to improve living conditions for the most vulnerable. Accelerating the formalisation of property rights in Roma settlements would help to provide basic infrastructures for adequate access to water and sanitation. Implementing stricter regulation and targeted financial assistance to households most in need would help incentivise housing renovations, reduce energy poverty and advance environmental objectives.

Subnational governments face a range of fiscal risks, defined as events whose realisation leads to significant deviations of revenue and/or expenditure from budgeted amounts. Fiscal risks reflect unforeseen macroeconomic developments, as well as structural shifts in the economy, including digitalisation and climate change. Sound management of these risks requires a comprehensive framework involving their identification, analysis, mitigation, sharing or transfer, and prudent accommodation. Within this framework, subnational governments need to strengthen their capacity to manage their own risks, but national governments also have a role to play. This includes mitigating risks created by national policies, minimising moral hazard in supporting subnational governments affected by exogenous shocks, and using their legislative powers to avert excessive subnational risk-taking. Effective intergovernmental cooperation is key to the sound management of subnational fiscal risks. The paper discusses how different levels of government can work together in applying this framework to the main types of risks. It also provides some examples of good international practices in the management of risks.

With interest rates at their highest levels in two decades, subnational governments (SNGs) are grappling with growing debt sustainability concerns. This paper investigates SNGs’ financing vulnerabilities by examining their debt levels and sensitivity to interest rate fluctuations. It provides an in-depth analysis of SNG debt portfolios, with a particular focus on marketable debt or bonds. While most SNG bonds have fixed rates and long maturities, some jurisdictions are significantly exposed to interest rate and foreign currency risks. Simulations reveal that interest expenses could rise substantially for some SNGs. Yet, worryingly, the variation in borrowing costs among SNGs within countries is often limited, suggesting potential weaknesses in market discipline. To navigate these challenges, the paper briefly explores how well-crafted fiscal rules, tax autonomy, and insolvency frameworks can help mitigate risks. It also highlights the need for further assessment of bank loans, as systematic information remains scarce. The paper provides insights for policymakers seeking to address risks and inform future reforms of SNG bond markets, reinforcing market discipline and bolstering fiscal resilience.

Informality is not a new phenomenon but today, in face of the multiplication of domestic and global shocks, the vulnerabilities associated with informal work and businesses are an undisputable hurdle to economic resilience and more inclusive and equal societies. Yet, certain policy measures implemented with the intention of addressing the consequences of crises on vulnerable groups in the society – groups that include informal workers and businesses – can unintentionally induce more informality, in a vicious cycle that makes formalisation and resilience even more difficult to reach. The report Informality and Structural Transformation in the Middle East and North Africa outlines a framework for assessing the impact of economic and social policies on informality. The framework was developed jointly by the ILO, OECD and UNDP, and is thought as a hands-on instrument, allowing policy makers to foresee early on in the policymaking cycles the effects diverse economic and social policies could have on the informal economy. This tool adds to the vast literature on informality. Understanding the expected impact of different policies on informality can help governments to identify measures that support their key objectives, e.g. helping firms in financial distress or expanding social protection, without altering motivations and incentives to formalisation.

Lao People’s Democratic Republic (Lao PDR) has made significant headway on its development path over the past three decades. The country’s sustained economic growth has been led by booming commodity exports and substantial inflows of external financing. Many Laotians have seen significant improvements in their well-being. Poverty has declined as household income has increased, and many important development goals in education and health have been achieved. In the face of macroeconomic challenges, a shift from commodity-driven growth to a more inclusive prosperity paradigm that emphasises the creation of broad-based opportunities, human capital development and green sustainability can unlock Lao PDR’s future development. This report presents priorities for overcoming the country’s current fiscal constraints and finding ways to fund this shift. Recommendations address strengthening Lao PDR’s sustainable finance and debt management, revenue generation and tax reform, investment promotion, and data capacity in order to tap into green finance mechanisms.