Annual Conference of the Global Forum of Productivity Venice, 8-9 July 2021
SPURRING GROWTH AND CLOSING GAPS THROUGH
DIGITALIZATION IN A POST-COVID WORLD: WHAT CAN POLICY DO? An OECD perspective
Giuseppe Nicoletti OECD
Productivity growth is slowing down and income inequalities are rising: Digitalisation, productivity and income gaps
Intangibles
+ Digital Technologies
Frontier firms: Continued productivity growth
Frontier firms: Higher wages
Productivity dispersion
Wage dispersion
Laggards: Sluggish productivity growth
Laggards: Lower wages
Slow aggregate productivity growth and rising inequality
The COVID-19 shock: opportunity or challenge? Frontier firms: Continued productivity growth
Intangibles
+
Digital Technologies
Accelerated digitalisation in broad swathes of economies
Laggards: Sluggish productivity growth
Frontier firms: Higher wages
Weaker investment, human capital erosion, rising concentration, weaker business dynamics
Laggards: Lower wages
Online platforms can help weather economic shocks and support growth by raising productivity of laggards Surge in platform activity increased resilience during the COVID crisis % growth YoY
Platform activity raises productivity of SMEs especially % point increase in growth
6
5
4
3
2
1
0 Average effect
Small-firms (<50)
Labour productivity
Micro-firms (<10)
Policies in 4 areas can help close gaps, support recovery and increase resilience via digitalisation 1 2
Facilitate intangibles financing...
...and especially skills upgrading
Intangibles
+
Digital Technologies
3
Set the right market conditions...
4
...and provide digital infrastructure and connectivity
Frontier: Continued productivity growth Productivity dispersion
Laggards: Sluggish productivity growth
Frontier: Higher wages
Wage dispersion
Laggards: Lower wages
A comprehensive policy approach leveraging on best practices is required
Supporting intangible investments by facilitating finance and the build up of skills Cross-country gaps in intangible investment are large and affect economic performance
Enhance finance for intangibles Direct public investments
Technical and managerial training
Tax expenditures
Bank financing (private banks and NDBs) Equity financing
Widen access to lifelong learning Increase awareness of opportunities
Strengthen online training to widen access
Establish competitive quality certification systems Link training support with occupational outcomes
Incentivize worker and manager training, especially in SMEs
Set the right market conditions and ensure access to connectivity Impact on productivity growth from platform use in markets with high- and low-persistence at the top
Level the competitive playing field and support business dynamism International cooperation among competition enforcers Upgrade antitrust law
Promote data security, data portability and multi-homing initiatives
Facilitate the creation of start-ups
Adapt taxation frameworks to the digital age through BEPS
Encourage private investment or invest directly
Expand coverage in rural areas
Data-driven regulation, to monitor quality and prices
Improve insolvency regimes & limit the loss of intangible assets
Increasing access to high-speed broadband is associated with higher productivity
Widen access to digital infrastructure Broadband development plans & usage targets
Digital government
Promote competition and remove barriers to investment
Domestic and international cooperation is needed for productivity-enhancing and inclusive digital transformation A comprehensive approach exploiting synergies among the several policy areas requires a whole of government effort based on close coordination among relevant ministries and agencies, with priorities set according to country-specific initial conditions
Effect on firm productivity (through digital adoption) of closing half of the gap with best performing countries in a range of areas Average sample country, effect after 3 years
4.0%
3.5% 3.0% 2.5% 2.0% 1.5%
International dialogue to share best practices and coordinate efforts in some areas, such as taxation competition crossborder data flows and intangibles and valuation standards is key to accelerate productivity-enhancing and inclusive digital transformation
1.0% 0.5% 0.0%
L - Lifelong learning I - Financing for F - Framework (upgrade skills) young innovative conditions (i.e. firms (incl. reducing regulatory intangible barriers to investment) competition and reallocation)
T - Access to technology (i.e. high-speed broadband)
For more details on the OECD contributions to the G20 Framework Working Group The following papers, which I summarised, will be on the GFP website as of 11 June 2021: • Spurring growth and closing gaps through digitalisation in a post-COVID world: Policies to LIFT all boats by Giuseppe Nicoletti, Mauro Pisu, Christina von Rüden and Hyungjeong Hwang
• Harnessing the productivity benefits of online platforms: Background paper by Hélia Costa, Mauro Pisu and Christina von Rüden
• Bridging the gap in the financing of intangibles to support productivity: Background paper by Lilas Demmou and Guido Franco