Progress on productivity demands joined-up policies, says OECD

10 Jun 16

Tackling badly coordinated policies will be key to stimulating stubbornly low productivity growth, the OECD has said.

In its , published yesterday, the think-tank said further structural reforms are needed to bolster the sluggish productivity growth that has been plaguing the world’s economies.

“If we want to get onto a path of stronger and more sustainable growth, we need better coordinated policies that put the pieces of our fragmented world back together in a more harmonious way,” explained OECD secretary general Angel Gurría.

He said structural policy action will be critical to, for example, adapt tax policies to favour equity rather than debt financing or to ensure equity in retirement and pensions legislation across socio-economic groups, reducing risk management challenges for insurance companies and pension funds. 

Currently, Gurría said such fragmentation within and across markets is impeding business productivity and the efficiency of investments, “holding back the forces that contribute to economic progress”.

The OECD noted that fragmentation takes various forms, and the report describes the “inconsistent structures, policies, rules, laws and industry practices that cultivate it, blocking efficiency and productivity growth.

One example highlighted was the inconsistency in foreign bribery enforcement regimes, which are insufficient in many countries so that bribery remains profitable, fragmenting the business environment.

The OECD highlighted the clean energy sector as a good example of the issues it has outlined. The sector is constrained by access to bank credit, excess supply from emerging markets, high equity costs, trade and policies and fractured domestic and international markets.

“There is plenty of money available but it is not being invested because of obstacles to move this capital into profitable projects,” said Gurría. “Creating the right framework conditions will be necessary to overcoming these obstacles.”

He went on: “There is no easy way out of the current low-growth trap. To get out of this vicious circle we need to go structural, as we have been saying all along through this crisis. And we are saying it again.”

A recent OECD report has stressed that low productivity was likely structural rather than cyclical, identifying issues including skill mismatches and sluggish investment as factors in the puzzle. A second report also outlined a connection between low productivity and rising inequality. 

  • Emma Rumney

    Emma is a reporter at Cooking Recipes International. She also writes for in the UK.

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