Productivity Spillovers from the Global Frontier and Public Policy

Abstract

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Reducing regional disparities for inclusive growth in Spain

“…Productivity growth, via more effective learning from the global frontier, is supported by a policy framework that promotes efficient resource allocation and is a positive function of its degree of international connectedness, ability to allocate skills efficiently and investments in knowledge based capital, including managerial capital and R&D (Saia, Andrews and Albrizio, 2015). Spain lags behind in a number of these structural factors and policies, including skill mismatches, managerial quality and innovation policies (Figure ).…”

“…The range indicates the country with the lowest (highest) value for the given structural variable or policy in a given reference year. Source: OECD calculations based on Saia et al (2015).…”

“…Although basic research results in significantly larger knowledge spillovers than applied research, private research effort is geared towards applied research, given that the output of basic research is freely available to the public (Akcigit, Hanley and Serrano-Velarde, 2013). Higher public spending on basic research enhances the ability of economies to learn from new innovations at the global frontier (Saia, Andrews and Albrizio, 2015), but basic research as a share of GDP at 0.27 in Spain is lower than the OECD average of 0.42. Assuming a 2% acceleration in MFP growth in the frontier economy, annual MFP growth is estimated to be around 1.5 percentage points higher in Spain, if it increased its share of basic research to 0.5% of GDP (Figure ).…”

Structural reforms to boost inclusive growth in Greece

“…These estimates might represent a lower bound as some reforms or aspects of reforms are not quantified, because this cannot be done in the current framework. For example, the quantification of the August 2015 changes in bankruptcy procedures cover the changes in the allocative efficiency and ability to catch up to the technology frontier (Saia, et al, 2015). However, the estimates do not take into account the effects of the reforms on resolving the large non-performing loans in the banking system, which would free resources to more productive activities and enable banks to start extending more credit.…”

“…This reduces productivity by keeping labour and capital locked into low productivity firms ( Figure 10). It also reduces the speed at which the economy absorbs technological progress at the frontier (Saia et al, 2015). Greece has historically underperformed in all relevant dimensions of an efficient bankruptcy regulation: costs, time involved in the procedures and the outcome in terms of the recovery rates, despite important changes in bankruptcy regulation in 2007 and some improvements in recent times, such as the elimination of a cumbersome conciliation procedure in 2013 ( Figure 11).…”