Global Productivity

This report looks at how regional policies can support productivity growth and jobs. While there has been a remarkable decline in inequality in OECD countries, inequality among regions within certain countries has increased over the same time period. Regions that narrowed productivity gaps tended to benefit from economically vibrant tradable sectors and integration with well-functioning cities. This report considers in detail the role of the tradable sector as a driver of productivity growth and its relationship with employment. It addresses the possible risks of a growing tradable sector and how diversification is central to strengthening regional economic resilience. It considers how regions integrate global value chains and highlights the role of regional and policy links in fostering productivity growth and job creation. It asks what policies can help better anticipate or cushion shocks from trade in specific regions and, more generally, what strategies and framework conditions are conducive for regional productivity and employment growth.

This book addresses the rising productivity gap between the global frontier and other firms, and identifies a number of structural impediments constraining business start-ups, knowledge diffusion and resource allocation (such as barriers to up-scaling and relatively high rates of skill mismatch).

Analysis based on micro and industry-level data highlights the importance of reallocation-friendly policies, including well-functioning product, labour and risk capital markets, efficient judicial systems, bankruptcy laws that do not excessively penalise failure, housing policies that do not unduly restrict labour mobility, and improvements in public funding and organisation of basic research which do not excessively favour applied vs basic research and incumbents vs young firms.