Giuseppe Nicoletti - Spurring Growth and Closing Gaps through digitalization -GFP Conference, Venice

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