Lisbon strategy
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Methodology to assess the progress in Lisbon strategy Smilovice, 5th December 2007 Alexandr Hobza Unit E-1:Coordination of structural reforms and their macroeconomic implications DG ECFIN, European Commission Outline of presentation 1. Lisbon strategy: structural reform process in Europe 2. Methodology to assess progress with Lisbon Strategy 3. Tracking reforms 4. Multi-step methodological approach to identifying growth-enhancing policies 5. Modelling effects of reforms Lisbon strategy Economic perspective Need to deal with economic challenges Low growth potential and adjustment capacity (euro area) Globalisation Ageing Climate change Response Macroecomic policies geared towards stability and growth Comprehensive coordinated process of structural reforms Lisbon strategy Historical perspective Continuation of pre-Lisbon coordination processes Politically driven process – European Council meetings and headline targets Mid-term review in 2005 and re-launch of the Strategy Lisbon strategy Procedural perspective Rationale for coordination Coordination of economic policies in EMU Lisbon: structured coordination based on soft tools Integrated Strategy for Growth and Jobs– new governance arrangements National ownership as a solution Political economy elements (wider participation, more focus, integration of policies) The national key challenges at the core of the EU strategic approach Spillovers of structural policies Policy area Model Simulation assumptions WorldScan Increasing R&D intensity from 1.86% to 2.7% in 2010 (partially paid through a R&D subsidy financed by lump-sum transfers from households). 3.3% 50% QUEST III Increasing R&D intensity from 1.86% to 2.54% in 10 years through a R&D subsidy (financed from consumption tax). 4.8%* 20% WorldScan Achieving skill targets set by 2003 European Council. Input into simulation (effects on labour efficiency from these policies and demographic developments) were modelled in a special model. 2.1%* 4% WorldScan Reduction in administrative burden by 25% modelled as a labour efficiency shock. 1.9% 5% NiGEM Reduction in administrative burden by 25% modelled as a shock to mark-up of prices over unit costs. 1.1% 10% WorldScan Labour supply shocks from achieving the 70% target for employment rate. 7% 4% R&D Skills Administrative burden Employment targets Average spillovers (as share of overall effect) Overall longrun effect on GDP in EU Complementarities between reforms Trhy produktů Znalostní ekonomika Trh práce Finanční trhy Makro *** Více konkurence => více investic do VaV (křivka ve tvaru „U“) Nižší renty snižují odpor vůči reformám; nižší regulace na trzích produktů zvyšuje efektivitu reforem na trzích práce Větší poptávka po úvěrech => větší příležitosti pro finanční sektor; Vyšší růst a nižší inflační tlaky => větší prostor pro akomodativní makroekonomické politiky; Znalostní ekonomika Zvyšování lidského kapitálu => větší nabídka kvalifikovaných pracovníků a větší flexibilita při realokaci zdrojů do nových aktivit *** Vyšší průměrná úroveň dovedností pracovníků => menší potřeba ochrany přes instrumenty na trzích práce; více inovativních firem => větší poptávka po práci Větší poptávka po úvěrech a větší investiční příležitosti Vyšší růstový potenciál usnadňující formulaci makroekonomických politik Trh práce Lehčí realokace pracovního vstupu => reformy trhu produktů jsou efektivnější Nižší náklady práce a větší flexibilita => lepší prostředí pro začínající inovativní firmy *** Větší objem úspor k dispozici; menší pravděpodobnost osobních bankrotů Větší flexibilita při stanovování mezd => větší odolnost vůči šokům a menší tlak na monetární a fiskální politiku Finanční trhy Nižší cena kapitálu => lepší alokace zdrojů Dostupnější kapitál pro high-tech firmy Lepší pojištění přes finanční trhy => menší potřeba pro pojištění na trzích práce *** Menší náklady na financování dluhu Větší kvalita veřejných financí => realokace prostředků na výdaje na VaV a vzdělávání Makroekonomická stabilita => snižují se přizpůsobovací náklady a snižuje se odpor vůči reformám; zdravé veřejné finance => větší prostor pro kompenzaci jedinců tratících na reformách Makroekonomická stabilita a růst => nižší pravděpodobnost finančních krizí *** Trhy produktů Makro Makroekonomická stabilita => lepší podmínky pro reformy; méně „crowding out“ soukromých investic Economic policy coordination in EMU Monetary policy stance Monetary policy ECB Article 105 Exchange rate Council (+ECB/Commission) Article 111 Integrated Guidelines Package Commission, Council, EP, European Council Broad Economic Policy Guidelines Article 99 Macroeconomic Dialogue Cologne Resolution Macroeconomic conditions Stability and Growth Pact Stability/Convergence Programmes Article 104, Amsterdam Resolution and Council Regulations Budgetary stance Employment Guidelines Article 128 Community Lisbon Programme National Reform Programmes Smoothly operating markets, potential growth Types of policy-making in the EU POLICIES SINGLE FORM OF MODE OF ACTORS COORDINATION COORDINATION INVOLVED Monetary policy Single policy (euro area) Single institution ECB Exchange rate Single policy (euro area) Coordination in the Council Council ECB Eurogroup Commission Competition policy Single policy Implementation by the Commission Member States Commission Council External trade (customs union) Single Policy Coordination in the Council Member States Commission Council Budgetary policy - Treaty rules - Commonly agreed rules and objectives - Information exchange - Peer review Coordination in the Council Member States Commission Council Eurogroup - Rules - Joint decisions - Council directives - Peer review Coordination in the Council POLICY HARD (balances) COORDINATION Internal Market (structural reforms) Joint fora PROCEDURES Excessive Deficit Procedure Stability and Growth Pact Broad Economic Policy Guidelines Member States Council Commission Types of policy-making in the EU POLICIES COORDINATION MODE OF ACTORS COORDINATION COORDINATION INVOLVED PROCEDURES Policy-mix - Dialogue - Information exchange Joint fora ECB Commission Council Eurogroup Social partners Macroeconomic Dialogue Budgetary policy - Commonly agreed objectives - Guidelines - Peer review Coordination in the Council Member States Commission Council Eurogroup Broad Economic Policy Guidelines - Information exchange - Discussion of best practices - Guidelines - Peer review Coordination in the Council Member States Commission Council Social partners Employment Guidelines - Information exchange - Discussion of best practices - Guidelines - Peer review Coordination in the Council Member States Commission Council Broad Economic Policy Guidelines (quality and sustainability of public finances) SOFT FORM OF Labour market policies (structural reforms) Product and capital market policies (structural reforms) Joint fora Stability and Growth Pact Broad Economic Policy Guidelines Lisbon strategy: governance structure Overall policy objectives set by Heads of State of Government (Spring European Council) + Integrated Guidelines as a blueprint for policy design Some common targets, e.g. employment rates of 70% by 2010, to raise spending on R&D to 3% of GDP, reduce administrative burden in complying with regulations by 25% between 2006 and 2010 Member States (not the European Commission) define their key growth challenges and reform commitments Reform priorities fixed for a three-year cycle, BUT annual reporting and evaluation exercise which leads to country specific political recommendations Lisbon strategy: A political process supported by economic analysis • Based on the premise an external constraint and peer pressure can help overcome reform bottlenecks • short-term (concentrated) costs versus uncertain long-term (dispersed benefits • rent-seeking interest groups can capture policy makers • Also recognises that there are economic spillovers (trade, internal market) and political economy spillovers (institutional learning, demonstration effects, peer pressure) in coordinating at EU level • Combination of evidence-based analysis supported by a political process can generate results • Can take years to “frame” a consensus on the nature/scale of policy challenge, and on the policy reforms needed to tackle them Work on the Lisbon evaluation methodology A three-pronged approach I: Tracking structural reforms II: Quantifying their impact on growth and jobs III: Modelling Practical arrangements ECFIN working together with other lead DGs, i.e. SG, ENTR and EMPL Developing analysis working with new Lisbon Methodology (LIME) Working Group attached to the EPC Method I – tracking structural reforms Developing institutional databases on reforms - LABREF: an operational database of enacted labour market reforms - MICREF : a database of microeconomic reforms, currently being developed Reporting tables/grids attached to NRPs - working with LIME group to streamline format and content LABREF database database on enacted labour market reforms in 9 areas covering labour taxation, unemployment and social benefits, ALMPs, EPL, disability and early retirement schemes, pension systems, wage bargaining, working time organisation, immigration and mobility. completed for 2000-2006 period (except BU and RO) LABREF database Measures contained in LABREF by reform area: 2000-2006 (% on total reforms in each geographical area) 0.30 New Members States euro-zone 12 0.25 EU15-excl euro zone 0.20 0.15 0.10 0.05 0.00 Labour Taxation Benef its ALMPs EPL Pensions Wage Bargaining Working Time Immigration Mobility MICREF database database of microeconomic reforms developed in cooperation between DGs ECFIN/ENTR and EPC with assistance from JRC includes policies such as market integration, competition policy, sector specific regulation, start-up conditions, business environment, R&D and innovation, education) Further steps - back-dating to 2004/5 by Spring 2008 - development of Internet interface underway Reporting tables <------------------------------------------------ ------ ESSENTIAL --------------------------------------------> <---------------- DESIRABLE -------------> Description module Classification module Impact and follow-up module Follow Functional Key REC. and Euro Direct Description Rationale of Timeline Timeline Integrated Comment up Eurostat Impact Input Output Comment Status Classificati challeng Points to area budget (voluntary) Guidelines of measure measure start end (voluntary) procedindicator variable indicator indicator on es watch REC cost ures Measure 1 Method II – analysing the impact of reforms on growth and jobs Starting point is a focus on growth drivers through decomposition of GDP - quantify the sources of per capita GDP gaps in the EU - quantify the determinants of growth over 2000-2005 using a growth accounting approach decomposed into 12 components (especially detailed on the labour market side) The purpose is - to provide an analytical benchmark for analysing the impact of structural reforms on growth and employment - verify that policies are focussing on the most important growth drivers Growth determinants and policy measures HDP na hlavu Využití pracovní síly (odpracované hodiny na hlavu) Odpracované hodiny na pracovníka Strukturální míra nezaměstnanosti Reformy na trzích práce Míra zaměstnanosti Míra participace na trhu práce Integrace finančních trhů Produktivita práce (HDP na odpracovanou hodinu) Kapitálová intenzita (kapitál na odpracovanou hodinu) Kvalita pracovní síly (složení dovedností) Souhrnná produktivita faktorů Kvalita kapitálu (složení a kvalita aktiv) Opatření pro znalostní ekonomiku Čistý technologický pokrok Reformy na trzích zboží a služeb Method II – a multistep approach Step 1: Identifying the components of GDP where MSs are underperforming (in terms of level and growth) relative to a given benchmark through GDP accounting. Step 2: Identifying the conceptual links between policy interventions, a list of indicators and the underperforming GDP components. Step 3: Using performance and policy indicators to identify the most problematic policy areas/issues, which are likely to be responsible for the income gaps/weak growth components. Step 4: Bringing together the results of step 1 (GDP accounting) and step 3 (indicator-based assessment of policy area performance) and supplementing them with country-specific expertise and data Step 5: Present the result in a policy context (link with NRP and Key Challenges Step 1: Growth accounting Standard disaggregation DG ECFIN refined disaggregation Native population Working age population Net migration Working age population share in total population Labour market Participation Unemployment rate Average hours worked per person Capital deepening (capital per hour worked) •Total factor productivity Degree of exogeneity or endogeneity Exogenous Partially endogenous Exogenous Youth Participation Largely endogenous Male prime-age participation Partially endogenous Female prime-age participation Partially endogenous Older-worker participation Largely endogenous Unemployment rate Partially endogenous Average hours worked per worker Partially endogenous Labour quality Largely endogenous Capital deepening (capital per low-skilled labour hour worked) Partially endogenous Total factor productivity Endogenous Step 1 – Growth accounting Y Y H L A QL POP H L POP Y H L α POP SWP PART ur QL K TFP 1 K H L H SWP PART (1 ur ) total GDP the annual hours worked per person employed total employment, which the product of POP, PART and (1-ur) the share of labour in total value added, which is set equal to 65% in all countries total population the working age population share (15-64) in total population total labour force participation rate the overall unemployment rate indicator of labour quality the stock of capital total factor productivity as a residual Step 1 – Growth accounting To capture the change in average quality of labour, we compute the average relative productivity of a person employed compared to those with low educational attainment: Q t 1 EL t EM t E H t . S WS ES t . WL Low, Medium, High . 2002 2002 Where Es and Ws are respectively employment and hourly wage (without overtime) for each educational attainment (ISCED-3). Step 1 – Growth accounting 1 Y A( L H QL ) K 1 A( L H QL ) ( L H QL ) 1 K 1 gY g A (1 )( g K g L g H gQL ) gQL g H g POP M g m g POP-M m K A( L H QL ) L H QL mt 1 ur g SW P g PART gur t 1 1 mt 1 1 urt 1 denotes a rate of growth native population net migration rate Explaining the gaps in GDP per capita across countries Percentage gap with respect to EU-5 1) GDP per capita Effect of labour resource utilisation (Hours worked per capita) Effect of labour productivity (GDP per hour worked) Change in gap 2000 - 2005 Luxembourg Ireland Denmark Netherlands Austria Belgium United Kingdom Sweden Finland Germany France EU-15 Euro area Italy EU-25 Spain Cyprus Greece Slovenia Czech Republic Portugal Malta Hungary Estonia EU-10 Slovak Republic Lithuania Poland Latvia -80 -60 -40 -20 0 20 40 60 80 100 -80 -60 -40 -20 0 20 40 60 80 100 1) Average of the best 5 performing EU countries (Luxembourg, Ireland, Denmark, Netherlands and Austria) -80 -60 -40 -20 0 20 40 60 80 100 -10 -5 0 5 10 15 20 Czech Republic: Growth accounting Growth decomposition 2000-2005 Gap with EU15 in level in 2005 GDP per capita GDP per capita Labour Productivity Labour Productivity Labour Resource Utilisation Labour Resource Utilisation Capital Deepening Capital Deepening Total Factor Productivity Total Factor Productivity Labour Quality (Education) Labour Quality (Education) Share of Working age Population Share of Working age Population 55-64 Participation 55-64 Participation Unemployment Rate Unemployment Rate Average Hours Worked Average Hours Worked Native Population Native Population Net Migration Net Migration Youth Participation Youth Participation 25-54 Male Participation 25-54 Male Participation 25-54 Female Participation 25-54 Female Participation -60 -40 -20 0 20 40 -2 -1 0 1 2 3 4 5 Step 1 – Growth accounting New features of the growth accounting - very detailed decomposition - accounting for the quality of labour - contribution of migration Caveats - descriptive approach, does not inform about causality - results affected by assumptions of technical nature – e.g. Cobb-Douglas PF, no economies of scale, calibration of labour share (though widely accepted) - growth and its components can be affected by the business cycle - developments in each component might be difficult to interpret in practice Step 2 – Making the link with policies Need to link growth accounting with policy interventions and performance on indicators need to draw on a wide body of economic research The structure of the fiches Definition and scope of the policy area Impact on growth components (theoretical mechanism and transmission channels); direct and indirect Evidence and estimated elasticities in recent literature Possible spillovers and complementarities with other policy areas Non-exhaustive list of relevant indicators Step 2 – Making the link with policies Labour market Innovation and knowledge Product market Macroeconomy Active labour market policies (training, job-search assistance, well-designed and targeted programmes Openness to trade and investment R&D, innovation policies and ICT Long-term sustainability of public finances and welfare policies Making work-pay: incentive to work through the interplay of tax and benefit system Barriers to entrepreneurship and business environment Education and life long learning Stability oriented macroeconomic policies Reforming labour taxation to stimulate labour demand Competition-friendly policy framework Relaxing job protection while combating labour market segmentation/dualisation Efficient financial markets and access to finance Working time organisation Specific labour supply measures for women Specific labour supply measures for older-workers Improving wage bargaining and wagesetting policies Immigration and integration policies Labour mobility (geographical and sectoral) Example: LS of older workers Policy area GDP components Policy and performance indicators Specific labour supply measures for olderworkers) Older-worker participation Policy indicators Implicit tax on continued work (Net change in pension wealth if retiring at 65 instead of 62 -2004 (-) Coverage of early retirement 2004 (-) Life-long learning: Participation of the population aged 55-64 in education and training 2000-2006 (+) Performance indicators Average exit age from the labour force 2001-2005 (+) Employment rate of older workers aged 55 to 64 - Women (%) 1992-2006 (+) Employment rate of older workers aged 55 to 64 - Men (%) 1992-2006 (+) Step 3: Scoring system Score = (Indicator-EU15 average)/Standard deviation *10 • trimming the score (3 stdev.) so as to avoid giving too much weight to outliers • not rounding the final value in the maquette but presenting it without decimal • reporting the EU15 average and the stdev. as well as the distance to alternative benchmarks (EU27, five best values, EU5, the Lisbon target) Step 3: Scoring system Under normal distribution EU15 Average+one stdev. E(X)+ (X) E(X)+0.4 (X) EU15 Weighed average E(X) E(X)- 0.4 (X) E(X) - (X) ++ =2 16% + 0 0 - =1 19% =0 31 % =-1 19% - - =-2 16 Table 1: Application of the new scoring system to step 1 (level and change)f GDP accounting level assessment vis-à-vis EU15 GDP per capita Labour Labour Capital Total Initial Share of 55-64 Unemploy Average Native Deepening Factor education Working age Participation ment Hours Population Migration Participation Rate Worked (fertility rate) (share of productivity utilisation Score BE BG CZ DK DE EE IE GR ES FR IT CY LV LT LU HU MT NL AT PL PT RO SI SK Productivity (Labour quality) Population 0.00 8 -30 -28 13 1 -30 23 -21 -8 0 -5 -19 -30 -30 30 -30 -30 13 11 -30 -30 -30 -22 -30 21 -30 -30 3 5 -30 14 -22 -9 12 -7 -24 -30 -30 30 -30 -22 13 -2 -30 -30 -30 -24 -30 -16 28 30 12 -6 28 7 8 3 -15 5 16 18 13 30 7 -10 -3 18 2 13 15 11 -7 2 -30 -30 -15 8 -30 4 3 -10 10 2 -30 -30 -30 -3 -30 -29 8 1 -30 -30 -30 -30 -30 28 -30 -21 13 -5 -25 18 -16 1 14 1 -1 -25 -19 30 -22 -2 8 -8 -24 -15 -30 -13 -21 -12 -6 -1 -5 12 3 -10 -10 -8 -10 -12 -9 -8 -7 1 8 -14 0 10 3 -7 2 3 4 Net Youth 25-54 25-54 Male Female Participation Participati -3 -30 20 -7 10 -29 -4 18 -1 9 -11 25 -27 -21 26 -30 6 11 3 -30 -1 -30 -12 11 2 3 10 15 6 12 -9 -11 -10 8 -19 2 11 17 -5 -5 -30 6 7 2 10 -7 18 11 foreign pop) -10 21 30 -4 4 13 15 8 19 -14 -3 17 21 12 4 19 29 8 14 30 6 27 30 30 -14 -9 0 16 5 12 6 -4 -1 -7 -15 5 7 6 -15 -13 -15 1 -14 -17 7 -7 -15 -12 -5 -4 8 8 -3 -3 9 -7 -3 -6 0 8 -4 -2 30 1 2 9 8 -28 0 -2 3 -30 -6 30 22 -3 -12 28 2 30 4 -4 14 7 20 19 -4 27 9 -15 3 26 6 30 8 9 2 -30 -6 8 -5 -30 10 -30 -5 12 -6 -3 -6 -7 5 -6 6 6 -3 -30 -3 -5 -7 -7 9 -27 -20 -7 11 30 -1 2 6 0 -10 30 30 -24 30 -22 -15 -9 14 -20 -18 -28 -19 -27 -12 -18 -12 18 2 -12 5 -13 0 -8 -13 -5 -9 -20 -17 -19 6 21 10 -11 -4 -15 -7 -10 Step 3: Scoring system GDP components Labour utilisation Share of working age population Native population Net migration Unemployment rate Average hours worked Youth participation 25-54 male participation 25-54 female participation 55-64 participation Labour productivity Capital deepening Total factor productivity Labour quality (educational attainment) GDP per capita Old scoring New scoring 2 30 2 30 -1 -6 -2 -20 1 8 2 22 -2 -12 2 20 1 10 0 0 -2 -30 -2 -30 -2 -21 0 -1 -2 -28 Improvements to the methodology Robustness checks Correlations between indicators Taking account of cyclicality Extending growth accounting to include sectoral decomposition or environtal dimension Aggregate score based on a narrower set of indicators Extending growth accounting to include forecast Presentational issues Next steps • Questionnaire to MSs to seek clarification on: • • • • • • new scoring scheme cyclical adjustments robustness checks presentation of results etc. « Final » proposal to be presented in January 2008 Methodology to be applied by May 2008 Mechanical application: overall results Policy areas -- Aggregate scores for CZ Labour market Active labour market policies Making work-pay: incentive to work through the interplay of tax and benefit system Reforming labour taxation to stimulate labour demand Relaxing job protection while combating labour market segmentation/dualisation Working time organisation Specific labour supply measures for women Specific labour supply measures for older-workers) Improving wage bargaining and wage-setting policies Immigration and integration policies Labour mobility (geographical and sectoral) Product and capital market regulations Openness to trade and investment Barriers to entrepreneurship and business environment Competition-friendly policy framework Efficient financial markets and access to finance Innovation and knowledge R&D, innovation policies and ICT Education and life long learning Macroeconomy Long-term sustainability of public finances and welfare policies Stability oriented macroeconomic policies Level Change 0 0 0 -1 1 -1 0 1 -1 0 -1 1 0 -1 0 0 1 1 2 0 0 -1 0 0 1 -1 -1 0 -1 0 1 0 0 0 0 0 Example: Making work pay Making work-pay: incentive to work through the interplay of tax and benefit system Unemployment benefit duration, months (Danish study-median of the min-max range) Average unemployment benefit duration (years) (OECD) Job availability requirement index (Danish study) Unemployment trap (low wage-earner): Marginal effective tax rate for an unemployed person (67% AW, single person) Unemployment trap (average wage-earner): Marginal effective tax rate for an unemployed person (100% AW, single person) Inactivity trap (low wage-earner): Marginal effective tax rate when moving from social assistance to work (67% AW, single person) Inactivity trap (average wage-earner): Marginal effective tax rate when moving from social assistance to work (100% AW, single person) Net Replacement Rates for unemployed persons (67% AW, single person) Net Initial Replacement Rates for unemployed persons (100% AW, single person) Average unemployment benefit replacement rate (%) (OECD) Unemployment rate - Pre-primary, primary and lower secondary education - levels 0-2 (ISCED 1997) (%) Employment rate - Pre-primary, primary and lower secondary education - levels 0-2 (ISCED 1997) (LFS) (%) Long-term unemployment rate Aggregate score on level Number of individual indicators with negative performance Level Growth 2 2 2 1 0 0 2 1 2 2 2 2 1 1 -2 -2 -1 0 3 -2 -2 1 1 2 Example: Female and older worker LS Specific labour supply measures for women Childcare (0-2 years) for less than 30 hours Childcare (0-2 years) for 30 hours and more Childcare (3 years to compulsory school age) for less than 30 hours Childcare (3 years to compulsory school age) for 30 hours and more Childcare (compulsory school age up to 12 years) for less than 30 hours Childcare (compulsory school age up to 12 years) for 30 hours and more Number of months of maternity/paternity/parental leave with benefits replacing at least 2/3 of salary Inactivity trap for the second member of a couple (half-time at 67% APW) Low-wage trap for second-earner income (first earner: 67% APW; second earner: 33% to 67%) Life-long learning. For women Female employment rate (%) Gender pay gap in unadjusted form gender segregation in occupations Gender segregation in sectors Unemployment gender gap Employment impact of parenthood Employment gender gap in full-time equivalent Female part-time workers in % of total female employment Female employees in part-time who could not find stardard employment as % of total employees Aggregate score on level Number of individual indicators with negative performance Specific labour supply measures for older-workers Implicit tax on continued work Coverage of early retirement Life-long learning: Participation of the population aged 55-64 in education and training Average exit age from the labour force- Women Average exit age from the labour force- total Employment rate of older workers aged 55 to 64- Men Employment rate of older workers aged 55 to 64- Women Aggregate score on level Number of individual indicators with negative performance Level -2 -2 -1 0 0 0 1 -2 0 -1 0 -1 -2 -1 -1 -2 1 -2 2 -1 11 Growth -2 2 -2 -1 1 2 2 -1 2 0 -2 0 5 Level Growth 1 1 -1 -2 0 1 -1 0 2 2 2 1 1 1 Example: Business environment Barriers to entrepreneurship and business environment Level Business investment - Gross fixed capital formation by the private sector as a percentage of GDP (STRIND er070)) (+) 1 Business demography - Birth rate - Number of real enterprise births of year n, divided by the population of active enterprises of year n (STRIND 0 er081) (+) Business demography - Survival rate - The percentage of all real enterprise births of year n which are still active in year n+2 (STRIND er082) -2 (+) Administrative burdens on startups (OECD) (-) -1 Regulatory and administrative opacity (OECD) (-) -2 Starting a Business - time, procedure, cost, capital requirement, average rank (World bank doing business) (-) -1 Dealing with Licenses - procedures, time, cost, average rank (World bank doing business) (-) -2 Registering Property - procedures, time, cost, average rank (World bank doing business) (-) 0 Paying Taxes average rank (World bank doing business) (-) -1 Enforcing Contracts - procedures, time, cost, average rank (World bank doing business) (-) 0 Closing a Business time, cost, recovery rate average rank (World bank doing business) (-) -2 Propensity towards entrepreneurship - Total population considering self-employment (in %) (European Commission, Flash Eurobarometer) -2 (+) Aggregate score on level -1 Number of individual indicators with negative performance 8 Growth -2 2 0 -1 -1 -1 -1 -1 5 Example: R&D, innovation and ICT R&D, innovation policies and ICT Level -2 Summary Innovation Index 2006 -1 High-tech exports - Exports of high technology products as a share of total exports -1 Gross domestic expenditure on R&D (GERD) - Percentage of GDP -1 Gross domestic expenditure on R&D (GERD) by source of funds - industry - Percentage of GDP -1 Gross domestic expenditure on R&D (GERD) by source of funds - government - Percentage of GDP -2 Gross domestic expenditure on R&D (GERD) by source of funds - abroad - Percentage of GDP -2 Science and technology graduates - total - Tertiary graduates in science and technology per 1000 of population aged 20-29 -2 Patent applications to the European Patent Office (EPO) - Number of applications per million inhabitants Patents granded by the United States Patent and Trademark Office (USPTO) - Number of patents per million inhabitants -1 Venture capital investments - early stage - Percentage of GDP -2 Venture capital investments - expansion & replacement - Percentage of GDP -2 Level of Internet access - households - Percentage of households who have Internet access at home 0 ICT expenditure - IT - Expenditure on Information Technology as a percentage of GDP 1 ICT expenditure - Telecommunications - Expenditure on Telecommunications Technology as a percentage of GDP -1 E-commerce via Internet - Percentage of enterprises' total turnover from e-commerce via Internet -2 E-government on-line availability - Percentage of online availability of 20 basic public services E-government usage by individuals - total - Percentage of individuals aged 16 to 74 using the Internet for interaction with public authorities -1 1 E-government usage by enterprises - Percentage of enterprises which use the Internet for interaction with public authorities -2 Broadband penetration rate - Number of broadband lines subscribed in percentage of the population -1 Aggregate score on level 15 Number of individual indicators with negative performance Growth 2 2 2 2 2 2 2 2 -1 0 2 0 2 1 1 Method III - Modelling the impact of structural refroms Simulations included in 2007 APR Reform area Modelling approach Coverage Labour and product markets QUEST II EU15 econometric estimates 13 OECD countries[1] Effective retirement age ECFIN ageing model EU15 aggregate Internal Market QUEST II EU25 aggregate Administrative burden QUEST III WorldScan EU15 aggregate EU25 Increased R&D spending QUEST III WorldScan EU15 aggregate EU25 [1] Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, United Kingdom. Main results Reform area Input into models Results Labour and product markets Changes in policy variables (e.g. tax wedge, taxes, unemployment benefits and regulation of PMs) since 1995. 2% increase in EU15 GDP and 1.4 p.p. reduction in structural unemployment Effective retirement age One year increase in retirement age 1.5% increase in EU15 GDP by 2025 and 2.5% by 2050 Enlarged Internal Market Gains from greater integration and enlargement (e.g. higher competition and more trade) over 1992-2006 2.2 increase in EU25 GDP and 1.4 increase in employment Administrative burden 25% reduction in administrative burden by 2010 1.3% increase in GDP by 2025 Increased R&D spending Reaching national R&D expenditure targets by 2010 2.6 to 4.4% increase in EU25 GDP (25-30% due to spillovers)
