Rafal Kierzenkowski

The Challenge of Restoring French Competitiveness

Since the beginning of the decade, France has seen a marked decline in its export performance, leading to growing concerns on the part of the authorities and of civil society about the economy’s capacity to adapt to the intensified globalisation of trade and investment in goods and services. The poor foreign trade performance of recent years is related to a series of factors, rather than to any single cause. It cannot be explained by external determinants alone, such as the exchange rate, the trade inroads of emerging countries with strong export potential or the sharp rise in oil prices in 2007-08. Indeed, it is not so much the loss of market share itself that is of concern (many countries have experienced this), but rather the extent of that loss, which reflects problems in responding to the acceleration in global demand earlier this decade, before the apparition of the current crisis. An analysis of the deterioration in competitiveness points to supply-side factors such as the relative inability of French firms to service foreign markets, and the pursuit of industrial strategies of offshoring the entire production process. Restoring competitiveness will require steps to strengthen the country’s growth potential and to address the main long-term determinants of that potential, such as fostering research and development, promoting innovation, reducing the tax burden, boosting competition and creating favourable conditions for businesses to grow rapidly. The lack of competitiveness is more often a symptom than the cause of one or more underlying economic weaknesses. What is called for, then, is a comprehensive policy response that addresses the sources of the competitiveness problem, rather than targeted interventions designed directly to remedy the growing trade deficit. This Working Paper relates to the 2009 OECD Economic Survey of France (www.oecd.org/eco/surveys/France).

Bridging the Housing Gap in Poland

Despite a high level of homeownership, the housing market in Poland is suffering from an important shortage. The difference between the number households and available dwellings, the number of dwellings per thousand inhabitants, and the availability of basic amenities (especially in rural areas) all indicate that significant improvements are needed to catch up to the most affluent OECD and EU countries. The formal rental segment of the market is also underdeveloped, contributing to low labour mobility and persistent disparities in regional unemployment. Given the social, economic and political dimensions of the problem, various housing policies implemented since the beginning of the transition process have aimed to fill the housing gap, though they have been either narrow in scope or have led to unclear results. However, the housing market has been buoyant in recent years, spurred by rising levels of GDP per capita, lower interest rates and the emergence of a competitive mortgage market. Yet a brisk price appreciation has also occurred at the same time, while households’ exposure to interest- and exchange-rate risks has significantly increased and banks’ funding capabilities have shrunk. Although the market has not been directly affected by the recent global financial turmoil, recent information shows that a turn-around is underway, with prices declining in several major cities as sentiment has plunged. This raises concerns about the capacity of the market to achieve a smooth adjustment in the face of a possible downturn. Combler le deficit de logements en Pologne Malgre la place importante qu’occupe la propriete, le marche immobilier polonais pâtit d’une importante penurie de logements. La difference entre le nombre de menages et le nombre de logements disponibles, la densite de logements par millier d’habitants et l’equipement en elements de confort de base (en particulier dans les zones rurales) sont autant de facteurs qui temoignent des progres que la Pologne doit encore accomplir pour se hisser au niveau des pays les plus riches de l’OCDE et de l’Union europeenne. Le segment locatif formel est egalement sous-developpe, ce qui contribue a une faible mobilite de la main-d’oeuvre et a la persistance de disparites regionales du chomage. La question du logement ayant une dimension sociale, economique et politique, la plupart des politiques du logement mises en oeuvre depuis le debut du processus de transition visaient a combler le deficit de logements, mais avaient une portee insuffisante ou ont eu des resultats mitiges. Il n’en reste pas moins que le marche immobilier a ete dynamique ces dernieres annees, notamment en raison de la hausse du PIB par habitant, de la baisse des taux d’interet et de l’apparition d’un marche hypothecaire concurrentiel. Toutefois, dans le meme temps, les prix se sont fortement apprecies, tandis que l’exposition des menages aux risques de taux de change et de taux d’interet s’est fortement accrue, ce qui a reduit les capacites de financement des banques. Par ailleurs, bien que le marche polonais n’ait pas ete directement touche par les turbulences financieres qui ont secoue l’economie mondiale ces derniers temps, de recentes donnees montrent que le retournement du marche est en cours, les prix ayant baisse dans plusieurs grandes villes a mesure que le climat des affaires se degradait. Cette situation amene a s’interroger sur la capacite des marches a reussir un ajustement en douceur en cas de retournement.

THE DRIVERS OF LABOR INCOME INEQUALITY — A LITERATURE REVIEW

Despite a general trend of increasing labor income inequality, there have been differences in the timing, intensity and even direction of these changes across OECD countries. These stylized facts have led to numerous studies about the main determinants of labor income inequality and, as a result, a significant revision of the previous consensus about the key drivers. The most researched channels include skill-biased technological change, international trade, immigration, education as well as the role of labor market policies and institutions.

The UK productivity puzzle through the magnifying glass

Since the start of the Great Recession, labour productivity growth has been weak in the United Kingdom, weaker than in many other OECD countries. The productivity shortfall, defined as the gap between actual productivity and the level implied by its pre-crisis trend growth rate, was nearly 20% for output per hour at the end of 2016. This study assesses the UK productivity puzzle and discusses its possible determinants at the sectoral level. Most of the UK productivity underperformance is structural rather than cyclical. Half of the productivity shortfall is explained by non-financial services (with information and communication being the largest contributor), a fourth by financial services, and another fourth by manufacturing, other production and construction. All but non-financial services and the construction sectors contribute disproportionately to the productivity shortfall compared to their shares in overall output and hours worked of the UK economy. In non-financial services, large increases in self-employed with no employees, reduced matching of skills to jobs and a lower capital-output ratio may have been a drag on productivity. Stagnant productivity in the financial sector is mainly linked to reduced risk-taking and leverage, as reflected by declining total factor productivity following its steep increases in the run-up to the crisis. Greater substitution of labour for capital and weak corporate restructuring have both held back productivity improvements in the manufacturing sector. Some causes of the productivity puzzle pre-date the crisis, including low tangible investment, too rapid expansion of financial services, weak innovation in the manufacturing sector, and a secular decline of oil and gas industries. This Working Paper relates to the 2018 OECD Economic Survey of the United-Kingdom (www.oecd.org/eco/surveys/economic-survey-united-kingdom.htm).

Le défi de redressement de la compétitivité française

Depuis le debut des annees 2000, la France a connu une deterioration marquee de sa performance a l’exportation, conduisant a des preoccupations accrues de la part des autorites et de la societe civile sur la capacite d’adaptation de l’economie a une mondialisation croissante des echanges et de l’investissement en biens et services. Les mauvaises performances enregistrees du commerce exterieur sont liees a une serie de facteurs plutot qu’a une seule cause unique. Elles ne peuvent etre expliquees par les seuls determinants externes tels que le taux de change, l’avenement dans le commerce mondial de pays emergents a fort potentiel d’exportation ou la forte hausse des prix du petrole en 2007-08. En effet, ce n’est pas tant la perte de parts de marches en soi qui est inquietante – elle s’est produite dans de nombreux pays – mais plutot son ampleur du a la difficulte a repondre a l’acceleration de la demande mondiale dans les annees 2000, datant d’avant l’apparition de la crise economique actuelle. En effet, l’analyse de la degradation de la competitivite renvoie davantage a des facteurs d’offre lies a la moindre aptitude des entreprises francaises a servir les marches etrangers, mais aussi au developpement de strategies industrielles d’etablissement a l’etranger de la totalite du processus de production. Le redressement de la competitivite passera par un renforcement de la croissance potentielle et une action sur ses principaux determinants a long terme, tels que l’accroissement de la recherche et developpement, la promotion de l’innovation, la baisse du poids de la fiscalite, une amelioration de la concurrence et la creation de conditions propices a une croissance rapide des entreprises. Le manque de competitivite est le plus souvent un symptome, et non la cause d’une ou plusieurs faiblesses economiques sous-jacentes. C’est pourquoi, il est preferable que l’intervention publique soit globale et porte sur les sources du probleme de competitivite et non qu’elle prenne la forme d’aides ciblees visant a remedier directement au deficit croissant de la balance commerciale. Ce document de travail se rapporte a l’Etude economique de l’OCDE de la France, 2009 (www.oecd.org/eco/etudes/France).