DOCSLIB.ORG

Understanding National Accounts Second Edition Revised and Expanded Updated to SNA 2008 and ESA 2010

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Understanding National Accounts Second Edition Revised and Expanded Updated to SNA 2008 and ESA 2010 Understanding N Understanding NATIONAL ACCOunTS Second Edition Revised and Expanded Updated to SNA 2008 and ESA 2010 This 2014 edition of Understanding National Accounts contains new data and new chapters ATIO Understanding and is adapted to the new systems of national accounts, SNA 2008 and ESA 2010, which come into effect in September 2014. It approaches N national accounts from a truly global perspective, AL AL with special chapters dedicated to international NATIONAL comparisons, globalisation and well-being as well A as to the national systems used in major OECD CCO economies, such as the United States. ACCOunTS Each chapter of this manual uses practical un examples to explain key concepts in national accounts in a clear and accessible way. Each TS TS François Lequiller Derek Blades concludes with a synthesis of key points covered in the chapter, followed by resources for further exploring the topic and by a set of exercises S to test your knowledge. It is an ideal guide econd Edition SECOND EDITION to national accounts for students and other interested readers. REVISED AND EXPANDED National accounts data as well as answers to the exercises and supplementary material are available at www.oecd-ilibrary.org. ISBN 978-92-64-21462-0 30 2014 05 1 P 9HSTCQE*cbegca+ Understanding National Accounts SECOND EDITION François Lequiller, Derek Blades This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Please cite this publication as: Lequiller, F. and D. Blades (2014), Understanding National Accounts: Second Edition, OECD Publishing. http://dx.doi.org/10.1787/9789264214637-en ISBN 978-92-64-21462-0 (print) ISBN 978-92-64-21463-7 (PDF) Series/Periodical: ISSN 0000-0000 (print) ISSN 0000-0000 (online) The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. Photo credits: Cover ©. Corrigenda to OECD publications may be found on line at: www.oecd.org/about/publishing/corrigenda.htm. © OECD 2014 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of the source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d'exploitation du droit de copie (CFC) at [email protected]. FOREWORD Foreword Today more than ever, national accounts remain at the core of a modern system of economic statistics. The global economic and financial crisis has further underlined the importance of a timely, reliable and comprehensive monitoring of economic activity and also pointed to directions for new developments and extensions in the accounts. National accounts provide the conceptual and actual tool to bring coherence to hundreds of statistical sources available in OECD countries. They deliver essential macro-economic indicators to guide policymaking. The questions, however, are whether users are sufficiently aware of the richness of information contained in the national accounts and fully exploit their analytical and statistical potential. At the same time, how can we ensure that users fully grasp the complex concepts underpinning the national accounts, as well as their limitations? And what about issues around their international comparability? This second edition of “Understanding National Accounts” intends to provide answers to these questions, and to many more, in an easy and accessible, yet rigorous, way. It is an update of the previous edition published by the OECD in 2006, which was very well received by both people familiar with the world of economic statistics, and national accounts in particular, and non-specialist users. Indeed, at the time many readers wrote to the authors that ”for the first time, they had come across a book on national accounts that was easy to understand and not boring!” Since 2006, four key developments have occurred that have made an update of the previous edition a must. First, the financial crisis that hit OECD countries has highlighted the need to better explain how strong movements in economic activity are actually reflected in national accounts. Second, in 2008, the System of National Accounts (SNA) underwent a major round of modernisation. One example of the revisions to the accounting system has been to treat expenditure in R&D as investment in knowledge. Previously, it was simply considered as a current cost item. Third, the new emphasis put on “better lives”, beyond the traditional objective of economic growth and GDP, has offered an opportunity to outline how the national accounts can also be a rich underlying source for tracking households’ material well-being. Finally, new data on “trade in value added” are now being compiled in parallel to core national accounts, allowing to better understand the increased interconnectedness of our economies UNDERSTANDING NATIONAL ACCOUNTS © OECD 2014 3 FOREWORD This new, augmented, version of “Understanding National Accounts” reflects the four developments above. In particular, its publication has been scheduled to coincide with the time when most OECD countries will have moved to the new 2008 System of National Accounts. I am confident that, like the previous one, this edition of the report will receive a similar warm welcome from all those, and they are numerous, whether young statisticians, students, journalists, economists, or citizens, who want to know more about the statistics that are at the heart of the measure of economic development in OECD economies. Martine Durand OECD Chief Statistician and Director, Statistics Directorate 4 UNDERSTANDING NATIONAL ACCOUNTS © OECD 2014 TABLE OF CONTENTS Table of contents Acknowledgements .............................................. 11 Chapter 1. The essential macroeconomic aggregates.................. 13 1. Defining GDP ............................................. 15 2. The first fundamental equation: Deriving GDP in volume ....... 21 3. Defining demand: the role of investment and consumption ..... 24 4. Second fundamental equation: Reconciling global output and demand .............................................. 26 5. Third fundamental equation: Reconciling global output and income .............................................. 30 Key points .................................................. 36 Going further................................................ 37 Exercises ................................................... 44 Chapter 2. Distinguishing between volume and price increases ....... 47 1. A word of caution: Compare volumes ........................ 48 2. The volume/price breakdown applied to changes over time ..... 50 3. The difficulties of aggregation ............................... 51 4. Volume indices and price indices ............................ 55 5. Constant prices ........................................... 57 6. “Chained” accounts and the loss of additivity ................. 58 7. Unpleasant practical consequences of chain linking ........... 61 8. The special cases .......................................... 63 9. And what about the price indices? ........................... 66 Key points .................................................. 69 Going further................................................ 70 Exercises ................................................... 72 Chapter 3. International comparisons ............................... 79 1. Comparison of growth rates................................. 80 2. Comparison of ratios: The example of the saving ratio, the profit rate and the public debt ratio....................... 83 3. Comparison of levels of variables: GDP per head in volume...... 87 4. The spatial volume/price breakdown: Purchasing power parities . 89 5. Comparison of variables in absolute terms: Household consumption 96 UNDERSTANDING NATIONAL ACCOUNTS © OECD 2014 5 TABLE OF CONTENTS Key points .................................................. 100 Exercises ................................................... 101 Chapter 4. Production: What it includes and excludes................. 103 1. The production frontier .................................... 106 2. The illegal economy and the underground economy............ 109 3. Measurement of output and of value added: The general case . 110 4. The measurement of output and of value added: Special cases . 113 5. Nomenclatures and classifications........................... 117 Key points .................................................. 120 Going further................................................ 121 Exercises ................................................... 126 Chapter 5. Defining final uses of GDP ............................... 129
Load more

Recommended publications
  • What Do We Know About the Labor Share and the Profit Share? Part I: Theories
    Working Paper No. 803 What Do We Know About the Labor Share and the Profit Share? Part I: Theories by Olivier Giovannoni* Levy Economics Institute of Bard College May 2014 * Correspondence: [email protected]. Translation assistance was provided by Dam Linh Nguyen, while Lei Lu provided research assistance for the technology section. Both Linh and Lei acknowledge financial assistance from the Bard Summer Research Institute. All remaining errors remain the author’s sole responsibility. The Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals. Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad. Levy Economics Institute P.O. Box 5000 Annandale-on-Hudson, NY 12504-5000 http://www.levyinstitute.org Copyright © Levy Economics Institute 2014 All rights reserved ISSN 1547-366X ABSTRACT This series of working papers explores a theme enjoying a tremendous resurgence: the functional distribution of income—the division of aggregate income by factor share. This first installment surveys some landmark theories of income distribution. Some provide a technology-based account of the relative shares while others provide a demand-driven explanation (Keynes, Kalecki, Kaldor, Goodwin). Two questions lead to a better understanding of the literature: is income distribution assumed constant?, and is income distribution endogenous or exogenous? However, and despite their insights, these theories alone fail to fully explain the current deterioration of income distribution.
    [Show full text]
  • Estimating the Effects of Fiscal Policy in OECD Countries
    Estimating the e®ects of ¯scal policy in OECD countries Roberto Perotti¤ This version: November 2004 Abstract This paper studies the e®ects of ¯scal policy on GDP, in°ation and interest rates in 5 OECD countries, using a structural Vector Autoregression approach. Its main results can be summarized as follows: 1) The e®ects of ¯scal policy on GDP tend to be small: government spending multipliers larger than 1 can be estimated only in the US in the pre-1980 period. 2) There is no evidence that tax cuts work faster or more e®ectively than spending increases. 3) The e®ects of government spending shocks and tax cuts on GDP and its components have become substantially weaker over time; in the post-1980 period these e®ects are mostly negative, particularly on private investment. 4) Only in the post-1980 period is there evidence of positive e®ects of government spending on long interest rates. In fact, when the real interest rate is held constant in the impulse responses, much of the decline in the response of GDP in the post-1980 period in the US and UK disappears. 5) Under plausible values of its price elasticity, government spending typically has small e®ects on in°ation. 6) Both the decline in the variance of the ¯scal shocks and the change in their transmission mechanism contribute to the decline in the variance of GDP after 1980. ¤IGIER - Universitµa Bocconi and Centre for Economic Policy Research. I thank Alberto Alesina, Olivier Blanchard, Fabio Canova, Zvi Eckstein, Jon Faust, Carlo Favero, Jordi Gal¶³, Daniel Gros, Bruce Hansen, Fumio Hayashi, Ilian Mihov, Chris Sims, Jim Stock and Mark Watson for helpful comments and suggestions.
    [Show full text]
  • Introduction to Macroeconomics Lecture Notes
    Introduction to Macroeconomics Lecture Notes Robert M. Kunst March 2006 1 Macroeconomics Macroeconomics (Greek makro = ‘big’) describes and explains economic processes that concern aggregates. An aggregate is a multitude of economic subjects that share some common features. By contrast, microeconomics treats economic processes that concern individuals. Example: The decision of a firm to purchase a new office chair from com- pany X is not a macroeconomic problem. The reaction of Austrian house- holds to an increased rate of capital taxation is a macroeconomic problem. Why macroeconomics and not only microeconomics? The whole is more complex than the sum of independent parts. It is not possible to de- scribe an economy by forming models for all firms and persons and all their cross-effects. Macroeconomics investigates aggregate behavior by imposing simplifying assumptions (“assume there are many identical firms that pro- duce the same good”) but without abstracting from the essential features. These assumptions are used in order to build macroeconomic models.Typi- cally, such models have three aspects: the ‘story’, the mathematical model, and a graphical representation. Macroeconomics is ‘non-experimental’: like, e.g., history, macro- economics cannot conduct controlled scientific experiments (people would complain about such experiments, and with a good reason) and focuses on pure observation. Because historical episodes allow diverse interpretations, many conclusions of macroeconomics are not coercive. Classical motivation of macroeconomics: politicians should be ad- vised how to control the economy, such that specified targets can be met optimally. policy targets: traditionally, the ‘magical pentagon’ of good economic growth, stable prices, full employment, external equilibrium, just distribution 1 of income; according to the EMU criteria, focus on inflation (around 2%), public debt, and a balanced budget; according to Blanchard,focusonlow unemployment (around 5%), good economic growth, and inflation (0—3%).
    [Show full text]
  • A Structural Model of the Unemployment Insurance Take-Up
    A Structural Model of the Unemployment Insurance Take-up Sylvie Blasco∗ Fran¸coisFontainey GAINS, University of Aarhus, BETA-CNRS, CREST and IZA LMDG and IZA. January 2012 - IN PROGRESSz Abstract A large fraction of the eligible workers do not claim the unemployment insurance when they are unemployed. This paper provides a structural framework to identify clearly, through the esti- mates, the economic mechanisms behind take-up. It incorporates take-up in a job search model and accounts for the determinants of claiming, especially the level of the unemployment benefits and the practical difficulties to make a claim. It provides a simple way to model selection into participation and sheds new light on the link between the job search and the claiming efforts. We estimate our model using a unique administrative dataset that matches a linked employer - employee data and the records of the national employment agency. Keywords: Unemployment Insurance Take-up, Job Search JEL Classification numbers: J64, J65, C41 ∗Address : Universit´e du Maine, Av. Olivier Messiaen, 72085 Le Mans Cedex 9, France ; Email: [email protected] yUniversity of Nancy 2, Email: [email protected]. zWe thank Jesper Bagger, Sebastian Buhai, Sam Kortum, David Margolis, Dale Mortensen, Fabien Postel-Vinay, Jean-Marc Robin, Chris Taber and participants at the Tinbergen Institute internal seminar, CREST-INSEE, Nancy and Royal Holloway seminars, the ESEM conference, the AFSE, IZA-Labor Market Policy Evalation, LMDG, T2M workshops for comments and discussions. This is a preliminary version of the paper, the readers are invited to check on the authors' websites for newer versions.
    [Show full text]
  • 2015: What Is Made in America?
    U.S. Department of Commerce Economics and2015: Statistics What is Made Administration in America? Office of the Chief Economist 2015: What is Made in America? In October 2014, we issued a report titled “What is Made in America?” which provided several estimates of the domestic share of the value of U.S. gross output of manufactured goods in 2012. In response to numerous requests for more current estimates, we have updated the report to provide 2015 data. We have also revised the report to clarify the methodological discussion. The original report is available at: www.esa.gov/sites/default/files/whatismadeinamerica_0.pdf. More detailed industry By profiles can be found at: www.esa.gov/Reports/what-made-america. Jessica R. Nicholson Executive Summary Accurately determining how much of our economy’s total manufacturing production is American-made can be a daunting task. However, data from the Commerce Department’s Bureau of Economic Analysis (BEA) can help shed light on what percentage of the manufacturing sector’s gross output ESA Issue Brief is considered domestic. This report works through several estimates of #01-17 how to measure the domestic content of the U.S. gross output of manufactured goods, starting from the most basic estimates and working up to the more complex estimate, domestic content. Gross output is defined as the value of intermediate goods and services used in production plus the industry’s value added. The value of domestic content, or what is “made in America,” excludes from gross output the value of all foreign-sourced inputs used throughout the supply March 28, 2017 chains of U.S.
    [Show full text]
  • (Brooks) Chapter 2 Financial Statements 2.1
    Financial Management: Core Concepts, 4e (Brooks) Chapter 2 Financial Statements 2.1 Financial Statements 1) The purpose of studying financial statements is ________. A) to mechanically build portfolio analysis B) to understand those portions of the statements that have relevance for financial decision making C) to primarily investigate all portions of the statements that have relevance for dividend policy D) to mechanically learn how to read and understand footnotes Answer: B Explanation: Accounting and finance view the numbers in DIFFERENT WAYS. Diff: 1 Topic: 2.1 Financial Statements AACSB: Analytical Thinking LO: 2.1 Explain the foundations of the balance sheet and income statement. Hmwrk Questions: * Taken from "Prepping for Exams" questions at the end of the chapter. 2) Which of the statements below is FALSE? A) The purpose of studying financial statements is to understand those portions of the statements that have relevance for financial decision making. B) We need to understand how to interpret and use the information presented in financial statements to form a picture of the financial profile of the firm. C) Accounting, it has been said, looks back to where a company has been—somewhat like looking through a rear view mirror. D) Accounting and finance view the numbers in the same way. Answer: D Explanation: Accounting and finance view the numbers in DIFFERENT WAYS. Diff: 2 Topic: 2.1 Financial Statements AACSB: Analytical Thinking LO: 2.1 Explain the foundations of the balance sheet and income statement. 3) Understanding the sources and uses of cash in the recent past will enable a manager to ________ the cash flow for a potential project of the firm.
    [Show full text]
  • AVAILABLE from a Price Index for Deflation of Academic R&D
    DOCUMENT RESUME ED 067 986 HE 003 406 TITLE A Price Index for Deflation of Academic R&D Expenditures. INSTITUTION National Science Foundation, Washington, D.C. REPORT NO NSF-72-310 PUB DATE 72 NOTE 38p. AVAILABLE FROMSuperintendent of Documents, U.S. Government Printing- Office, Washington, D.C. 20402 ($.25, 3800-00122) EDRS PRICE MF-$0.65 HC-$3.29 DESCRIPTORS Costs; Educational Finance; *Educational Research; Financial Problems; *Financial Support; *Higher Education; Research; Research and Development Centers; *Scientific Research; *Statistical Data ABSTRACT This study relates to price trends affecting research and development (R&D) activities at academic institutions. Part I of this report provides the overall results of the study with limited discussion of measurement concepts, methodology and limitations. Part II deals with price indexes and deflation-general concepts and methodology. Part III discusses methodology and data base and Part IV describes alternative computations and approaches. Statistical tables and charts are included.(Author/CS) cO Cr` CD :w U S DEPARTMENT OF HEALTH EDUCATION & WELFARE OFFICE OF EDUCATION THIS DOCUMENT HASBEEN REPRO DUCED EXACTLY ASRECEIVED FROM THE PERSON OR ORGANIZATION ORIG INATING IT POINTS OFVIEW OR OPIN IONS STATED DONOT NECESSARILY REPRESENT OFFICIALOFFICE OF EDU CATION POSITION OR POLICY RELATED PUBLICATIONS Title Number Price National Patterns of R&D Resources: Funds and Manpower in the United States, 1953-72 72-300 $0.50 Resources for Scientific Activities at Universi- ties and Colleges, 1971 72-315 In press Availability of Publications Those publications marked with a price should be obtained directly from the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C.
    [Show full text]
  • Gross Domestic Product (GDP)
    1 SECTION Gross Domestic Product ross domestic product (GDP) is a measure of a country’s economic output. GDP per capita and GDP Gper employed person are related indicators that provide a general picture of a country’s well-being. GDP per capita is an indicator of overall wealth in a country, and GDP per employed person is a general indicator of productivity. 8 CHARTING INTERNATIONAL LABOR COMPARISONS | SEPTEMBER 2012 U.S. BUREAU OF LABOR STATISTICS | www.bls.gov Gross domestic product, selected countries, in U.S. dollars, 2010 United States China Japan CHART India 1.1 Germany Gross domestic United Kingdom France product (GDP) Brazil was more Italy than 14 trillion Mexico dollars in the Spain South Korea United States Canada and exceeded Australia 4 trillion Poland dollars in only Netherlands Argentina three other Belgium countries: Sweden China, Japan, Philippines and India. Switzerland Austria In addition to China Greece Singapore and India, other large Czech Republic emerging economies, Norway such as Brazil and Portugal Mexico, were among the Israel 10 largest countries in Denmark terms of GDP. Hungary Finland The GDP of the United Ireland States was roughly 5 New Zealand times larger than that of Slovakia Germany, 10 times larger Estonia than that of South Korea, 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Trillions of 2010 U.S. dollars and 40 times larger than that of the Philippines. NOTE: GDP is converted to U.S. dollars using purchasing power parities (PPP). See section notes. SOURCES: U.S. Bureau of Labor Statistics and The World Bank.
    [Show full text]
  • Does Google Search Index Help Track and Predict Inflation Rate? an Exploratory Analysis for India
    Does Google Search Index Help Track and Predict Inflation Rate? An Exploratory Analysis for India By G. P. Samanta1 Abstract: The forward looking outlook or market expectations on inflation constitute valuable input to monetary policy, particularly in the ‘inflation targeting' regime. However, prediction or quantification of market expectations is a challenging task. The time lag in the publication of official statistics further aggravates the complexity of the issue. One way of dealing with non-availability of relevant data in real- time basis involves assessing the current or nowcasting the inflation based on a suitable model using past or present data on related variables. The forecast may be generated by extrapolating the model. Any error in the assessment of the current inflationary pressure thus may lead to erroneous forecasts if the latter is conditional upon the former. Market expectations may also be quantified by conducting suitable surveys. However, surveys are associated with substantial cost and resource implications, in addition to facing certain conceptual and operational challenges in terms of representativeness of the sample, estimation techniques, and so on. As a potential alternative to address this issue, recent literature is examining if the information content of the vast Google trend data generated through the volume of searches people make on the keyword ‘inflation' or a suitable combination of keywords. The empirical literature on the issue is mostly exploratory in nature and has reported a few promising results. Inspired by this line of works, we have examined if the search volume on the keywords ‘inflation’ or ‘price’in the Google search engine is useful to track and predict inflation rate in India.
    [Show full text]
  • THE ESSENTIAL MACROECONOMIC AGGREGATES Chapter 1
    Chapter 1 THE ESSENTIAL MACROECONOMIC AGGREGATES 1. Gross Domestic Product (GDP) 2. “Real” GDP and GDP deflator 3. Investment and consumption 4. A first macroeconomic reconciliation 5. The second macroeconomic reconciliation 1 THE ESSENTIAL MACROECONOMIC AGGREGATES CHAPTER 1 The Essential Macroeconomic Aggregates In this first chapter, our aim is to give an initial definition of the essential macroeconomic variables, listed in the table below, and taken from the I. Each chapter of this OECD Economic Outlook for December 2004.1 We have chosen to book uses an example from illustrate this chapter using the example of Germany, but we might as well a different country. have chosen any other OECD country, since the structure of the country chapters in the OECD Economic Outlook is the same for all countries. X I. Table 1. Main macroeconomic variables Germany,a 1995 euros, annual changes in percentage 2002 2003 2004 2005 2006 Private consumption –0.7 0.0 –0.7 0.8 1.9 Gross capital formation –6.3 –2.2 –2.0 0.6 3.4 GDP 0.1 –0.1 1.2 1.4 2.3 Imports –1.6 3.9 6.4 4.9 7.5 Exports 4.1 1.8 8.1 5.7 8.1 Household saving ratio1 10.5 10.7 11.1 11.1 10.8 GDP deflator 1.5 1.1 0.9 0.8 0.9 General government financial balance2 –3.7 –3.8 3.9 –3.5 –2.7 1. Net saving as % of net disposable income. 2. % of GDP. a) The report dates from December 2004.
    [Show full text]
  • Capital Depreciation and Labor Shares Around the World: Measurement and Implications∗
    Capital Depreciation and Labor Shares Around the World: Measurement and Implications∗ Loukas Karabarbounis Brent Neiman University of Chicago and NBER University of Chicago and NBER October 2014 Abstract The labor share is typically measured as compensation to labor relative to gross value added (\gross labor share"), in part because gross value added is more directly measured than net value added. Labor compensation relative to net value added (\net labor share") may be more important in some settings, however, because depreciation is not consumed. We document that both gross and net labor shares have declined around the world over the past four decades. Some countries, including the United States, experienced increases in the value of depreciation and therefore their net labor share declined by less than their gross labor share. The average economy, however, experienced a similarly sized decline in both measures. Using a simple model, we analyze the relationship between technology, depreciation, factor shares, and inequal- ity. Consistent with our empirical findings, we demonstrate that gross and net labor shares move together in response to changes in the price of investment goods but not necessarily in response to other shocks. We illustrate that both labor share measures can be jointly informative about the structure of production, realization of shocks, and transitional dynamics of consumption inequality. JEL-Codes: E21, E22, E23, E25. Keywords: Depreciation, Labor Share, Inequality. ∗We gratefully acknowledge the support of the National Science Foundation and Chicago Booth. The Online Appendix that accompanies this paper can be found on the authors' web pages. 1 Introduction A recent wave of empirical work has invigorated interest in theories of factor shares, capital accumulation, growth, and inequality.
    [Show full text]
  • Reducing Income Inequality While Boosting Economic Growth: Can It Be Done?
    Economic Policy Reforms 2012 Going for Growth © OECD 2012 PART II Chapter 5 Reducing income inequality while boosting economic growth: Can it be done? This chapter identifies inequality patterns across OECD countries and provides new analysis of their policy and non-policy drivers. One key finding is that education and anti-discrimination policies, well-designed labour market institutions and large and/or progressive tax and transfer systems can all reduce income inequality. On this basis, the chapter identifies several policy reforms that could yield a double dividend in terms of boosting GDP per capita and reducing income inequality, and also flags other policy areas where reforms would entail a trade-off between both objectives. 181 II.5. REDUCING INCOME INEQUALITY WHILE BOOSTING ECONOMIC GROWTH: CAN IT BE DONE? Summary and conclusions In many OECD countries, income inequality has increased in past decades. In some countries, top earners have captured a large share of the overall income gains, while for others income has risen only a little. There is growing consensus that assessments of economic performance should not focus solely on overall income growth, but also take into account income distribution. Some see poverty as the relevant concern while others are concerned with income inequality more generally. A key question is whether the type of growth-enhancing policy reforms advocated for each OECD country and the BRIICS in Going for Growth might have positive or negative side effects on income inequality. More broadly, in pursuing growth and redistribution strategies simultaneously, policy makers need to be aware of possible complementarities or trade-offs between the two objectives.
    [Show full text]