Documents Gal, Peter N. 18 results

"This paper explores the economics of Artificial Intelligence (AI), focusing on its potential as a new General-Purpose Technology that can significantly influence economic productivity and societal wellbeing. It examines AI's unique capacity for autonomy and self-improvement, which could accelerate innovation and potentially revive sluggish productivity growth across various industries, while also acknowledging the uncertainties surrounding AI's long-term productivity impacts. The paper discusses the concentration of AI development in big tech firms, uneven adoption rates, and broader societal challenges such as inequality, discrimination, and security risks. It calls for a comprehensive policy approach to ensure AI's beneficial development and diffusion, including measures to promote competition, enhance accessibility, and address job displacement and inequality."

"This paper describes the methodology used for crosswalking occupation-based measures of Green (“environmentally friendly”) and Brown (“polluting”) jobs from the Standard Occupational Classification (SOC) system to the International Standard Occupation Classification (ISCO) 08 at the most detailed (4-digit) level. The original, task-based Greenness scores by Vona et al. (2018) are provided at the 8-digit SOC level, and the industry-based Brownness measures are provided in 6-digit SOC. Crosswalking these measures requires several choices in terms of weighting and aggregating, which this paper describes in detail. The robustness of the resulting measures to the different weighting options and underlying assumption is tested using Linked Employer-Employee data from Portugal. An empirical application to the Productivity-Greenness link at the firm level shows the robustness of this link to different weighting choices, and confirms that all of the different measures derived are consistent in measuring the Greenness of jobs."

"In this paper, we aim to bring the debate on the global productivity slowdown – which has largely been conducted from a macroeconomic perspective – to a more micro-level. We show that a particularly striking feature of the productivity slowdown is not so much a lower productivity growth at the global frontier, but rather rising labour productivity at the global frontier coupled with an increasing labour productivity divergence between the global frontier and laggard (non-frontier) firms. This productivity divergence remains after controlling for differences in capital deepening and mark-up behaviour, suggesting that divergence in measured multi-factor productivity (MFP) may in fact reflect technological divergence in a broad sense. This divergence could plausibly reflect the potential for structural changes in the global economy – namely digitalisation, globalisation and the rising importance of tacit knowledge – to fuel rapid productivity gains at the global frontier. Yet, aggregate MFP performance was significantly weaker in industries where MFP divergence was more pronounced, suggesting that the divergence observed is not solely driven by frontier firms pushing the boundary outward. We contend that increasing MFP divergence – and the global productivity slowdown more generally – could reflect a slowdown in the diffusion process. This could be a reflection of increasing costs for laggard firms of moving from an economy based on production to one based on ideas. But it could also be symptomatic of rising entry barriers and a decline in the contestability of markets. We find the rise in MFP divergence to be much more extreme in sectors where pro-competitive product market reforms were least extensive, suggesting that policy weaknesses may be stifling diffusion in OECD economies."

"This paper presents a first set of updates and extensions of the large body of existing evidence about the aggregate labour market impact of structural policies, in the context of enhancing the OECD's supply-side framework for the quantification of reform packages. In line with previous findings, elements of the tax benefit system, activation policies and wage setting institutions are found to be robust policy determinants of the aggregate employment and unemployment rates. Looking beyond the overall employment impact, outcomes for vulnerable groups such as the low educated, the youth and the elderly tend to be more affected by certain structural policies, including specific measures targeted at them. Finally, more competition-friendly product market regulations are also found to impact aggregate employment rates positively and significantly, although less robustly."

"Motivated by the on-going interest of policy makers in the sources of job creation, this paper presents results from a new OECD project on the dynamics of employment (DynEmp) based on an innovative methodology using firm-level data (i.e. national business registers or similar sources). It demonstrates that among small and medium sized enterprises (SMEs), young firms play a central role in creating jobs, whereas old SMEs tend to destroy jobs. This pattern holds robustly across 17 OECD countries and Brazil, extending recent evidence found in the United States. The paper also shows that young firms are always net job creators throughout the business cycle, even during the financial crisis. During the crisis, entry and post-entry growth by young firms were affected most heavily, although downsizing by old firms was responsible for most job losses. The results also highlight large cross-country differences in the growth potential of young firms, pointing to the role played by national policies in enabling successful firms to create jobs."

"This paper investigates the role of policies and institutions for aggregate labour market dynamics during the recent financial crisis using firm-level data. First, it provides comparable estimates on firm-level labor adjustment by country, industry and firm size. Second, using variance decomposition methods, it shows that differences in firm-level labor adjustment accounts for about 40% of the cross-country variation in aggregate employment growth at the outset of the crisis. We interpret this as evidence that differences in institutional settings accounted for a substantial part of the variation in aggregate employment growth. Third, we find that stronger protection for regular workers is associated with lower (higher) employment (earnings-per-worker) response in the wake of output shocks. This suggests employment protection shifts the burden of adjustment from the extensive to the intensive margin. However, in explaining the diverse cross-country patterns in employment adjustment during the crisis, the impact of employment protection alone seems to be small."

"This document describes and discusses a new supply side framework that quantifies the impact of structural reforms on per capita income in OECD countries. It presents the overall macroeconomic impacts of reforms by aggregating over the effects on physical capital, employment and productivity through a production function. On the basis of reforms defined as observed changes in policies, the paper finds that product market regulation has the largest overall single policy impact five years after the reforms. But the combined impact of all labour market policies is considerably larger than that of product market regulation. The paper also shows that policy impacts can differ at different horizons. The overall long-term effects on GDP per capita of policies transiting through capital deepening can be considerably larger than the 5- to 10-year impacts. By contrast, the long-term impact of policies coming only via the employment rate channel materialises at shorter horizon."

"Empirical research on the drivers of multi-factor productivity (MFP) is abundant at the firm- and industry level but surprisingly little research has been conducted on the determinants of MFP at the macroeconomic level. In this paper, we seek to understand the drivers of country-level MFP with a special emphasis on product and labour market policies and the quality of institutions. For a panel of OECD countries, we find that anticompetitive product market regulations are associated with lower MFP levels and that higher innovation intensity and greater openness go in tandem with higher MFP. We also find that the impact of product market regulations on MFP may depend on the level of labour market regulations. Better institutions, a more business friendly environment and lower barriers to trade and investment amplify the positive impact of R&D spending on MFP. Finally, we also show that cross-country MFP variations can be explained to a considerable extent by cross-country variation in labour market regulations, barriers to trade and investment and institutions (including corruption)."

"The United Kingdom is preparing a modern industrial strategy to boost labour productivity across the whole country and to narrow regional gaps in living standards. This raises the question of the optimal allocation of scarce resources in meeting these targets. This study identifies industrial strengths of each region and scope to boost regional productivity through the channel of higher capital intensity. Overall regional investment ratios appear weakly linked to regional productivity, but the sectoral composition of regions and their type of investment are more important determinants. Each region has productivity leaders, but the concentration of such firms is the highest in the south of England. Differences in the representation of the most productive firms in regions are strongly related to differences in regional productivity. The empirical methodology quantifies the productivity effects of raising the capital intensity in each sector-region, focusing on viable firms falling behind the national productivity frontier in all but the finance and insurance sectors over 1995-2014. To enhance labour productivity of lagging regions, the industrial strategy should promote the catch up of firms with the national best performers in services sectors, in particular knowledge intensive services such as ICT and business services, but also wholesale and retail trade. This finding is consistent with the UK's leading global position in high value-added services sectors. The type of investment matters: boosting research and development in the manufacturing sector in some lagging regions would also be effective in stimulating productivity. Manufacturing investment cannot be a substitute to investment in services given the small size of the manufacturing sector and its high exposure to competition from rapidly emerging global hubs. However, this study does not quantify the effects of skills, the benefits of greater industrial diversification and the positive impact that larger cities would have on agglomeration effects."

"This document describes the OECD's new Structural Policy Indicators Database for Economic Research (SPIDER). The database compiles data from various existing databases. It contains indicators capturing structural policies (including institutions, framework condition policies and policies specifically related to labour markets and drivers of productivity and investment such as trade, skills and innovation). It also contains some basic macroeconomic indicators. The main idea of the database is to provide all the data needed for empirical analysis on structural policies in one place to facilitate empirical investigations. The indicators collected comprise three types of data: data with long-time series covering OECD countries, data covering a larger set of countries for a varying number of years, and finally a set of time-invariant indicators. The paper illustrates the use of the database on the basis of different growth regressions employed in the literature."