Using Indicators to Assess Progress on Structural Reform: Strengths, Weaknesses and the OECD s Going for Growth Approach

Transcription

1 2011/SOM3/EC/WKSP/003 Using Indicators to Assess Progress on Structural Reform: Strengths, Weaknesses and the OECD s Going for Growth Approach Submitted by: OECD Workshop on Approaches to Assessing Progress on Structural Reform San Francisco, United States September 2011

2 Using Indicators to Assess Progress on Structural Reform: Strengths, Weaknesses and the OECD s Going for Growth approach San Francisco, September 2011 Romain Duval Head of Structural Surveillance Division OECD Economics Department Introduction Choice of indicators of reform progress depends on their intended use In ANSSR context, unilateral reform commitments made by governments are shared with other APEC members and implementation will then be monitored => 3 properties good indicators should meet in this context: relevance, credibility and accountability Specifically, good indicators would arguably: Bear a strong and direct link with the final objective (relevance) Be actionable by governments (credibility of commitments) Lend themselves to subsequent monitoring and review of progress in international context (government accountability) 2

3 Some simple features of indicators that strengthen relevance and accountability (properties 1 & 3) Relevance can be strengthened by: - Picking up categories of indicators that bear closest possible relationship with final policy goal => Example: % of workforce with a degree better than labour productivity if goal is to enhance labour market training and education (Singapore template) => Example: use WB Doing business indicators if goal is to lower cost of doing business but OECD PMR indicators better if goal is to strengthen competition Accountability is stronger when: - Indicators are narrowly defined => Quantitative indicators are best in this regard and should be favoured => For qualitative ones, avoid broad formulations, e.g. pass law(s) X & Y enabling improvement Z in R&D collaboration between academia and industry is better than R&D collaboration between academia and industry (Chinese Taipei template) - There are neither too few nor (especially) too many indicators => There were over 10 for just 1 objective in some presentations in Singapore - Indicators are actionable, strengthening credibility and accountability 3 Actionable indicators strengthen credibility of commitments (property 2) Final reform objective Policy indicator Outcome indicator De jure policy setting De facto policy setting Input(s) from government Output/efficiency measures 3 types of indicators that are clearly actionable and thereby strengthen credibility of reform commitments, and incidentally accountability Government has direct AND quick leverage on output Government has NO direct or NO quick leverage on output Qualitative Quantitative Qualitative Quantitative 4

4 Actionable vs. non-actionable indicators: some examples Policy indicators: De jure vs. de facto: => e.g. Competition Law vs. number of fines imposed by Competition Authority Outcome indicators: Inputs vs. outputs on which government has no direct leverage: => e.g. public R&D spending vs. total number of innovation patents Inputs vs. outputs on which government has no quick leverage: => e.g. public spending on (independent) justice or number of permits and licences granted automatically without bureaucratic interference vs. targeted improvement in corruption perception index (Indonesia template) Outputs on which government has direct and quick leverage vs. outputs on which they do not: => e.g. caseload per worker in public administration X (and more broadly public sector productivity indictors) vs. perception-based government effectiveness index => e.g. % of cohort X entering university vs. % of workforce with a degree (Singapore template) 5 Policy or outcome indicators? Distinction not always obvious (continuum of indicators): There are pure policy (e.g. competition law) and outcome (e.g. labour productivity) indicators But some fall in between (e.g. student performance, perception-based public-sector corruption) or even fully merge both dimensions (e.g. number of civil servants, if goal is to streamline public sector) No choice in some cases (e.g. only outcome indicators available) When choice exists, OECD preference goes for policy indicators: Fosters greater peer pressure: => Pressure to change course of policy greater, especially if indicators are comparable internationally and updated regularly (e.g. WB Doing Business or OECD PMR) => Limited policy impact of the EU s Lisbon strategy partly owes to excessive use of outcome indicators (e.g. youth employment rather than youth cost of labour, e.g. employment of older workers rather than design of pension systems etc) Strengthens ownership and thereby more diffuse peer pressure: => Allows quantitative empirical analysis of gains from policy reforms, including by independent public and private bodies 6

5 The OECD s Going for Growth approach to reform indicators Going for Growth indentifies 5 reform priorities for each OECD and BRIICS country (including over half APEC members) based on mapping between performance and policy weaknesses: Performance indicators capture final policy goal itself, not what needs to be done to achieve that goal (# their use in some ANSSR templates) What needs to be done is captured only by policy indicators. Priority given to de jure indicators when de facto settings may differ Still some policy indicators mix performance and policy when pure policy indicators are missing (e.g. student scores in education area) Policy indicators are used both to identify/re-set reform priorities and to track reform progress supplemented by reform intensity indicators that are more qualitative in nature, but more regularly updated and can cover priority areas where indicators do not exist 7 Going for Growth performance indicators: a simplified overview Income (GDP per capita) Labour utilisation (Hours worked per population) Labour productivity (GDP per hour worked Hours per employee Employment rates Total factor productivity Physical capital Human capital Final performance indicators Education and training Exposure to trade and FDI Innovation Business R&D Financial developmen t Intermediate performance indicators 8

6 Going for Growth policy indicators: a simplified overview Product market Regulation (stance) Barriers to entrepreneurship State control Barriers to trade and investment Taxation and subsidies Tax structure Corporate taxation R&D Incentives Labour market Regulation Employment protection Minimum wage Tax and benefit system (Dis-)incentives to work embedded in income support Labour tax wedges Institutions Bargaining system Union density Other areas Various measures Financial market (financial repression) Agriculture (subsidies) Health / Education Infrastructure spending Energy (subsidies) Quasi outcome, for lack of good policy indicators De jure indicators for which de facto 9 alternatives would exist Tracking reform progress through changes in hard policy indicators: one illustrative example Progress towards easing anti-competitive economy-wide product market regulation (index 0-6 from least to most restrictive) OECD average GBR AUT FRA EU19 PRT MEX BEL CZE LUX KOR SVK SWE ITA NZL FIN HUN AUS NOR CHE DNK JPN NLD ESP CAN IRL DEU USA ISL TUR GRC POL OECD average Source: OECD Going for Growth 2010 publication and product market regulation database 10

7 Tracking reform progress through changes in soft reform intensity indicators: one illustrative example Responsiveness to Going for Growth recommendations (Share of country-specific priorities on which governments took some subsequent action in %, annual average over , covering only pre-2011 OECD member countries) Average Source: OECD Going for Growth 11 Thank you! 12

8 Further material: the OECD PMR indicator system in a nutshell Product market regulation State control Barriers to entrepreneurship Barriers to trade and investment Public ownership Involvement in business operations Regulatory and administrative opacity Administrative burdens on start-ups Barriers to competition Explicit barriers to trade and investment Other barriers Scope of public enterprise Size of public enterprise Special voting rights Control of public enterprise by legislative bodies Price controls Use of command and control regulation Licenses and permits system Communication and simplification of rules and procedures Administrative burdens for corporations Administrative burdens for sole proprietor firms Sector-specific administrative burdens Legal barriers Antitrust exemptions Ownership barriers Tariffs Discriminatory procedures Regulatory barriers {regulation data} {regulation data} {regulation data} {regulation data} {regulation data}{regulation data}{regulation data}