Alain de Serres

The Macroeconomic Implications of Ageing in a Global Context

This study was prepared in the Economics Department as a contribution to the Organisation -wide study of the economic consequences of population ageing. It presents a number of long-term scenarios illustrating the likely domestic and international macroeconomic effects of ageing across the OECD and policies which might ameliorate or reverse underlying tensions. This work draws together the broad range of elements involved within a consistent framework, based on the Secretariat’s new international dynamic general equilibrium macroeconomic model (MINILINK). A “business-as-usual” case is examined in which, without improvements in labour market performance or specific policy adjustments to allow for the pressures of ageing, economic growth is projected to slow significantly over the next 50 years in nearly all OECD countries; world real interest rates remain stable at current levels or even rise, because of the effects of ageing on private savings and the possible build-up of public ... Ce travail constitue une contribution du Departement economique a l’etude realisee au niveau de l’ensemble de l’Organisation sur les consequences economiques du vieillissement des populations. Il presente un certain nombre de scenarios de long-terme illustrant d’une part les effets macroeconomiques probables du processus de viellisssement sur les plans national et international, sur les flux internationaux entre les regions OCDE et non OCDE et d’autre part le role des politiques economiques pour limiter ou eliminer les tensions generees par ce processus. Cette etude integre dans un meme cadre coherent, base sur le nouveau modele international d’equilibre general dynamique du Secretariat (MINILINK), un large ensemble d’elements constitutifs du phenomene de vieillissement. Le cas d’une scenario “a politique inchange” est analyse. Il met en evidence qu’en l’absence d’amelioration des performances du marche du travail ou d’ajustement specifique des politiques pour faire face aux ...

The Decline in Private Saving Rates in the 1990s in OECD Countries: How Much Can Be Explained By Non-Wealth Determinants?

The substantial decline in private-sector saving rates observed in several OECD countries in the late 1990s coincided in several cases with a sharp increase in household financial net worth. This was seen by many observers as evidence that the strong rise in equity and residential property prices during the late 1990s had been treated by households as a permanent increase in wealth, leading to an unsustainable drop in saving and raising fears of an eventual negative wealth effect. Applying estimation techniques for systems of dynamic panel equations, this paper looks at basic determinants of private saving for a sample of 15 OECD countries and finds that the sharp decline in saving observed after 1995 can be largely explained, even in a post-sample fashion, by fundamentals other than financial wealth. Among the determinants, the rise in public-sector saving is found to have contributed the most to the decline in private saving between 1995 and 2000. Based on this investigation, there is little evidence that consumers had gone too far in responding to the stock market boom of the late 1990s, even in countries where private saving rates have fallen to historically low levels. On the other hand, the results suggest that a loosening of fiscal policy may have a limited stimulatory impact on private consumption...

Regulation of Financial Systems and Economic Growth

This paper examines whether regulation that is more conducive to competitive and efficient financial systems has a significant positive impact on sectoral output and productivity growth in a sample of 25 OECD countries. More specifically, following a methodology used by Rajan and Zingales (1998), the paper tests whether industries that depend more heavily on external sources of funding tend to grow faster in countries that have more competition-friendly regulation in markets for banking services and financial instruments. The regulatory indicators are assembled from surveys conducted by the World Bank on regulations in banking and securities markets. They point to substantial variations in the stance of regulation across countries, in particular with respect to the broad rules underpinning securities market transactions. The empirical analysis indicates that financial system regulation matters for output growth both in a statistical and economic sense.

The Contribution of Economic Geography to GDP Per Capita

This article examines how much of the dispersion in economic performance across OECD countries can be accounted for by the proximity to areas of dense economic activity. To do so, various indicators of distance to markets and transportation costs are added as determinants in an augmented Solow model, which serves as a benchmark. Measures of distance to markets are found to have a statistically significant effect on GDP per capita. And the estimated economic impact is far from negligible. The reduced access to markets relative to the OECD average could contribute negatively to GDP per capita by as much as 11% in Australia and New Zealand. Conversely, a favourable impact of around 6-7% of GDP is found in the case of two centrally-located countries: Belgium and the Netherlands. The paper provides also some tentative evidence that spending on R&D and human capital might have a stronger effect on GDP per capita in countries with a higher degree of urban concentration.

Have Developed Countries Escaped the Curse of Distance

There is widespread evidence that a better access to markets contributes to raising income levels. However, no quantification of the impact of distance to markets has been made on the basis of a sample restricted to advanced — and therefore more homogeneous — countries. This paper applies the framework developed by Redding and Venables (2004) on a panel data covering 21 OECD countries over 1970-2004, and shows that, relative to the average OECD country, the cost of remoteness for countries such as Australia and New Zealand could be as high as 10% of GDP. Conversely, the benefit for centrally-located countries like Belgium and the Netherlands could be around 6-7%. Second, the paper explains why the key estimated parameter in the Redding-Venables model is biased upwards in cross-section samples that mix both developing and developed countries, because of the inability to adequately control for heterogeneity in technology levels across countries. The paper also provides a detailed discussion of the links between the ?death-of-distance? hypothesis, the evolution of transport costs and that of the elasticity of trade to distance. Les pays developpes ont-ils echappe a la malediction de la distance ? De nombreuses etudes empiriques ont montre qu‘un meilleur acces aux marches contribue a augmenter les revenus. Cependant, aucune quantification de l‘impact de la distance aux marches n‘a ete effectuee a partir d‘un echantillon homogene limite aux pays developpes. Ce papier applique le cadre developpe par Redding and Venables (2004) a des donnees de panel couvrant 21 pays de l‘OCDE entre 1970 et 2004, et montre que, relativement a la moyenne des pays de l‘OCDE, le cout de l‘eloignement geographique pour des pays comme l‘Australie et la Nouvelle Zelande s‘eleve a environ 10% de PIB. Reciproquement, le benefice que tirent les pays ayant une position centrale comme la Belgique et les Pays-Bas serait de l‘ordre de 6-7%. Deuxiemement, cette etude explique pourquoi le parametre-cle dans le modele Redding-Venables est biaise a la hausse dans des echantillons en coupe qui melent pays developpes et en developpement, en raison de l‘incapacite a controler l‘heterogeneite des niveaux technologiques entre pays. Le papier propose egalement une discussion detaillee des liens entre l‘hypothese de la « fin de la distance », l‘evolution des couts de transport et celle de l‘elasticite du commerce a la distance.

Sectoral Shifts in Europe and the United States: How they Affect Aggregate Labour Shares and the Properties of Wage Equations

This paper sheds light on the importance of aggregation bias in the analysis of wage shares developments over time and across countries. We focus on five European countries and the United States and show that the trend decline in the aggregate wage share observed in these countries over much of the 1980s and 1990s partly reflects changes in the sectoral composition of the economy. The application of a fixed-weight aggregation method changes the profile of the observed wage share in a significant way: in particular there is no longer sign of an overshooting of the wage share levels of the early-1970s. Error-correction wage equations based on the adjusted wage shares generally have a better regression fit and show long-run elasticities of real wages to unemployment that vary less across countries and are substantially lower than those obtained with observed shares. These results are broadly confirmed by wage regressions using sectoral data and the Pooled Mean Group estimator ... Changements sectoriels en Europe et aux Etats-Unis : Impact sur les parts salariales globales et les proprietes des equations de salaire Cette etude examine l’importance du biais d’agregation dans l’analyse de l’evolution des parts salariales au cours du temps et entre pays. L’etude couvre cinq pays europeens ainsi que les Etats-Unis et montre que la baisse tendancielle de la part salariale agregee observee dans ces pays durant la majeure partie des annees 80 et 90 reflete en partie des changements dans la composition sectorielle de l’economie. L’application d’une methode d’agregation basee sur des poids fixes change de maniere significative le profil des parts salariales observees: plus particulierement, les parts salariales ainsi ajustees ne descendent plus en deca du niveau du debut des annees 1970. Les equations de salaires a correction d’erreurs basees sur les parts salariales ajustees ont en general de meilleures proprietes statistiques et generent des elasticites de long-terme des salaires par rapport au niveau de chomage qui varient moins a travers les pays et qui sont significativement inferieures a celles obtenues a partir des parts observees. Ces resultats sont dans l’ensemble confirmes par les estimations d’equations de salaire basees sur des donnees sectorielles et l’estimateur de « pooled mean group ».

Falling Wage Shares in Europe and the United States: How Important is Aggregation Bias?

This paper sheds light on the importance of aggregation bias in the analysis of wage shares developments over time and across countries. We focus on five European countries and the United States and show that the trend decline in the aggregate wage share observed in these countries over much of the 1980s and 1990s partly reflects changes in the sectoral composition of the economy. The application of a fixed-weight aggregation method changes the profile of the observed wage share in a significant way: in particular there is no longer sign of an overshooting of the wage share levels of the early-1970s. Error-correction wage equations based on the adjusted wage shares generally have a better regression fit and show long-run elasticities of real wages to unemployment that vary less across countries and are substantially lower than those obtained with observed shares.

Structural Policies and Growth: A Non-Technical Overview

In contrast to what has happened throughout the 1960s and 1970s, some of the largest EU countries and Japan are no longer closing the income gap vis-a-vis the United States. Worse, the gap may even be widenining since the mid-1990s. While in the case of Japan the gap in GDP per capita is essentially due to the lagging performance in labour producitvity, the European Union is trailing mainly in terms of labour resource utilisation, reflecting both lower employment rates and fewer hours worked. This paper provides a brief overview of the main structural factors thought to have contributed to differences in the degree of labour resource utilisation, as well as in the intensity of physical and human capital use and in the pace of technological progress. In doing so, it provides a set of performance and policy indicators which can be used to assess progress achieved in structural reform.

Estimating Prudent Budgetary Margins

The Maastricht Treaty imposes a debt limit of 60 per cent of GDP and a deficit ceiling of 3 per cent of GDP for countries participating in Stage 3 of European Monetary Union (EMU). The Stability and Growth Pact goes further and specifies the circumstances under which a deficit can be regarded as excessive, speeds up the procedure and defines the sanctions in the event of excessive deficits.

THE WIDTH OF THE INTRA-EUROPEAN ECONOMIC BORDERS

This paper first provides a brief overview of the literature on market segmentation and then presents an empirical exercise that sheds more light on the significance of border effects across European countries. The literature suggests that integration in the EU goods and financial markets is typically more advanced than among the other OECD countries. On the other hand, integration in Europe remains significantly lower than that observed between regions within countries. The empirical exercise is based on a set of comparable price data of tradeable goods collected just before the launch of the single currency. The paper finds that for a given distance, crossing national borders adds significantly to the price differential across European cities. However, this border effect is substantially smaller than the one found in previous estimates focusing on European and North American cities, which were based on the comparison of much broader price indices such as the consumer price index ... Cette etude passe brievement en revue la litterature traitant de la segmentation des marches puis presente un exercice empirique qui examine la question de l’importance des effets frontiere a travers les pays europeens. Dans l’ensemble, les conclusions des diverses etudes portant sur la question semblent indiquer que l’integration des marches de biens et des marches financiers europeens est plus avancee qu’elle ne l’est generalement parmi les autres pays de l’OCDE. Par contre, l’integration des marches en Europe demeure sensiblement plus faible que celle observee entre les regions d’un meme pays. L’exercice empirique presente dans cette etude s’appuie sur un ensemble de donnees comparables de prix de biens echangeables recueillis dans un grand nombre de villes europeennes a la veille du lancement de la monnaie unique. Les resultats obtenus mettent en evidence que pour une distance donnee, le fait de traverser les frontieres nationales ajoute sensiblement a la difference de prix ...