Restoring the Lustre of the European Economic Model

Comment
Rethinking European growth
ARC 2011: New growth models for Europe
Restoring the Lustre of the
European Economic Model
Indermit Gill and Martin Raiser
with
Andrea Dall’Olio, Truman Packard, Kaspar Richter,
Naotaka Sugawara, Reinhilde Veugelers,
Juan Zalduendo and others
Copyright rests with the author. All rights reserved.
Work in Progress
§ Question One
What is the European growth model?
2
Principal Components
Trade
Finance
Enterprise
Innovation
Labor
Government
Work in Progress – Preliminary Findings
3
Europe’s Growth Agenda?
Government
Demographic
Shifts
Labor
Innovation
Productivity
Growth
Enterprise
Finance
Modern
Services
Trade
Work in Progress – Preliminary Findings
4
The European Growth Model: Trade
More open
Trade Openness, % of GDP, average of 2005-2009
120
100
80
60
40
20
0
EFTA
EU15
EU
EU12 Acc. E.Prtn.
Periph.
States States
N.Amr. USA
Ocea.
JPN
E.Asia LAC Africa BRA
CHN
IND
RUS
Source: World Development Indicators.
Work in Progress – Preliminary Findings
5
The European Growth Model: Finance
With Capital Flowing the Right Way
Capital inflows (current account deficits) and per capita GDP growth, 1997-2008
Source: World Bank Staff Calculations, based on IMF data..
Note: Each dot represents a four-year average during the period covered: 1997-2000, 2001-2004, and 2005-2008.
Work in Progress – Preliminary Findings
6
The European Growth Model: Enterprise
Businesses that seem to have more social responsibilities
Principal Component Analysis Index of Doing Business ratings, 2009
88
86
78
74
89
82
73
69
62
69
66
60
57
58
59
56
47
47
39
EFTA EU15
EU15 EU15 EU15 EU EU12 Acc. E.Prtn.N.Amr. USA JPN E.Asia LAC Africa BRA CHN IND RUS
North Conti SouthPeriph.
StatesStates Ocea.
Source: World Bank Doing Business database.
Notes: Averages computed using principal component analysis . Kosovo, Malta and Liechtenstein are not covered by Doing Business,
and are not included. Albania and Venezuela are not included because closing business rating is not available for them.
Work in Progress – Preliminary Findings
7
The European Growth Model: Innovation
Governments that see R&D as a public responsibility
Research and Development Expenditure, Share of GDP, and Share Public, 2000-2009
R&D Expenditure, % of GDP
4
3
2
1
0
EFTA
EU15
EU
EU12
Periph.
Acc. E.Prtn.
States States
N.Amr. USA
Ocea.
JPN
E.Asia
LAC
Africa
BRA
CHN
IND
RUS
E.Asia
LAC
Africa
BRA
CHN
IND
RUS
% of R&D Expenditure Financed by Government
80
60
40
20
0
EFTA
EU15
EU
EU12
Periph.
Acc. E.Prtn.
States States
N.Amr. USA
Ocea.
JPN
Source: UNESCO.
Work in Progress – Preliminary Findings
8
The European Growth Model: Labor
People get to work less
Labor Utilization in Europe and Other Countries, average of 2005-2009
Labor Force Participation Rate, Aged 15-64, %
82.4
EFTA
81.2
CHN
76.4
N.Amr.
Ocea.
75.2
USA
73.3
BRA
72.8
71.9
71.6
71.0
JPN
E.Asia
EU15
RUS
69.5
67.5
EU
E.Prtn.
Periph. States
67.1
66.9
62.9
60.9
54.6
LAC
EU12
Acc.
States
IND
Africa
42.8
39.9
39.8
37.8
37.5
RUS
Africa
EU12
44.2
43.3
41.6
36.5
Africa
RUS
EU12
Acc.
States
Labor Force Participation Rate, Aged 15-24, %
69.1
EFTA
65.1
N.Amr.
Ocea.
63.6
BRA
63.3
CHN
59.8
USA
48.9
48.9
47.9
45.4
45.0
EU15
E.Asia
LAC
IND
JPN
55.0
52.0
50.8
44.1
EU
Acc. E.Prtn.
Periph. States States
Labor Force Participation Rate, Aged 55-64, %
73.6
EFTA
66.8
JPN
62.6
USA
60.7
60.2
N.Amr. E.Asia
Ocea.
57.4
LAC
56.6
CHN
BRA
IND
48.4
47.0
E.Prtn.
EU
EU15
States Periph.
Source: ILO.
Work in Progress – Preliminary Findings
9
The European Growth Model: Government
With governments that are more redistributive
Gini Coefficients of Income Inequality before and after Taxes and Transfers, mid-2000s
Work in Progress – Preliminary Findings
10
§ Question Two
Does Europe need a new growth model?
11
Europe—Post-War Growth Superstar
Relentless growth in the United States, a growth miracle in Europe,
and resurgence in Asia, 1820-2008
Western
Europe
Southern
Europe
Eastern
Europe
(Former)
Soviet
Union
United
States
Japan
East Asia
Latin
America
1820-70
1.0
0.6
0.6
0.6
1.3
0.2
-0.1
0.0
1870-1913
1.3
1.0
1.4
1.1
1.8
1.5
0.8
1.9
1913-50
0.8
0.4
0.6
1.8
1.6
0.9
-0.2
1.4
1950-73
3.9
4.7
3.8
3.3
2.5
8.1
2.4
2.6
1973-90
1.9
2.3
0.5
0.8
2.0
3.0
0.6
0.7
1990-2008
1.6
2.3
2.6
0.8
1.7
1.1
3.0
1.8
Year
Note: Regional aggregates are population weighted. Western Europe is used here to refer to Austria, Belgium, Denmark, Finland, France, West
Germany, Italy, the Netherlands, Norway, Sweden, Switzerland, and the United Kingdom. Eastern Europe refers to Albania, Bulgaria,
Czechoslovakia, Hungary, Poland, Romania, and Yugoslavia. Southern Europe refers to Greece, Ireland, Spain, and Turkey. After 1989, West
Germany becomes Germany and the data reflect the newly independent countries in Eastern Europe that emerge from Czechoslovakia and
Yugoslavia.
Source: Penn World Tables 6.3, World Bank staff.
Work in Progress – Preliminary Findings
12
Europe—The Convergence Machine
Living standards have converged in Europe, not much elsewhere
Consumption levels in 1970 and growth between 1970 and 2009
Source: Penn World Tables 6.3, World Bank staff.
Work in Progress – Preliminary Findings
13
Europe—a big part of the world economy
Europe’s share in world GDP has been going down, but only in PPP terms
GDP shares, percent, 2000 and 2010
% of World Total
GDP
GDP, PPP
2000
2010
2000
2010
Europe 45
EU27
EU15
EU12
EFTA
EU Candidates
Eastern Partnership
28.8
26.4
25.1
1.3
1.3
1.0
0.2
29.1
25.8
23.8
2.0
1.5
1.4
0.4
28.3
25.0
22.6
2.5
0.9
1.7
0.6
24.3
20.8
18.3
2.6
0.9
1.8
0.8
USA
30.7
23.1
23.4
19.1
East Asia
Japan
China
22.7
14.5
3.7
23.2
8.7
9.3
21.2
7.7
7.1
25.7
5.7
13.2
2.0
1.4
0.8
3.3
2.7
2.3
2.9
3.8
2.4
2.8
5.5
3.7
Sum of Countries Above
86.5
83.8
81.9
81.1
World GDP (trillions)
32.2
63.0
42.3
76.3
Brazil
India
Russian Federation
Source: WDI.
Work in Progress – Preliminary Findings
14
But productivity is lagging
Europe’s leaders are slowing down
EU15 Labor Productivity, relative to the United States (=100 left panel) and Japan (=100 right panel)
United States
Japan
160
140
120
100
80
60
1970
1980
1990
2000
2010 1970
1980
1990
2000
2010
Source: OECD.
Work in Progress – Preliminary Findings
15
Populations are aging
By 2060, Europe’s labor force might shrink by 50 million
Population Projection, 2010-2050
Working-Age Population (2010 = 0)
Percentage of Population Aged 65 and Older
40
40
20
30
0
20
-20
10
-40
0
2010
2020
2030
EU15
2040
EU12
Source: US Census, International
Data Base. China
Brazil
2050
2010
Japan
India
2020
2030
2040
2050
United States
Russian Federation
Work in Progress – Preliminary Findings
16
And public debt has been rising
Government debt rose during the crisis, except in non-European emerging economies
Gross Public Debt in 2008 and 2010
Source: World Bank staff, based on IMF WEO.
Work in Progress – Preliminary Findings
17
Main Questions
Trade:
Is Europe taking advantage of enlargement?
Finance:
Are capital flows in Europe too big?
Enterprise:
Are Europe’s enterprises overregulated?
Innovation:
Are Europe’s fundamentals flawed?
Labor:
Is labor making Europe uncompetitive?
Government:
Are governments in Europe too big?
Work in Progress – Preliminary Findings
18
§ Question Three
Is Europe taking advantage of enlargement?
19
Trade: Western Europe is trading more with the East
New member states have become more important trade partners for the EU15
EU15 trade with NMS as share of all trade, 1996-2008
Trade with NMS as a % of Trade with Whole World
3
4
5
6
7
EU15 trade share with NMS (All Products)
1995
2000
2005
2010
Year
Exports
Imports
Work in Progress – Preliminary Findings
20
Trade is becoming more sophisticated
New member states’ exports to EU15 have become more sophisticated
Hausmann-Hwang measure of export sophistication, 1996-2008
I_Expy
14000 14500 15000 15500 16000 16500
Sophistication of Intermediates Exports
1995
2000
NMS2004 to EU15
World to EU15
Year
2005
2010
NMS2004 to World
Work in Progress – Preliminary Findings
21
In modern services, candidate countries have been slipping
Modern—more tradable—services are growing faster almost everywhere
Annual growth in modern and traditional services, 2000-08
Source: Chapter 2 in Golden Growth
Work in Progress – Preliminary Findings
22
§ Question Four
Are capital flows in Europe too large and fast?
23
Largest financial flows, more of it FDI
The Biggest Capital Flows to Emerging Markets in History
(% GDP; period average of group median values)
2001-2004
2005-2008
12
9
6
3
0
-3
-6
-9
EU15
EU Coh.
FDI
EU10
EU Cand. EU Neigh. East Asia
Portfolio
Other
LAC
EU15
Total Capital Flows
EU Coh.
EU10
EU Cand. EU Neigh. East Asia
CA Balance
LAC
FX Reserves, change
Source: IMF World Economic Outlook and authors’ calculations. “EU coh.” refers to the ‘old’ EU cohesion countries.
Work in Progress – Preliminary Findings
24
Sizeable financial FDI is a European phenomenon
Emerging Europe’s Most Unique Feature: Foreign Banks
(% of banking system assets; median values)
EU Cohesion
EU10
EU Candidates
100
50
0
1997
2001
2005
2008
EU Neighborhood
1997
2001
2005
2008
East Asia
1997
2001
2005
2008
2001
2005
2008
LAC
100
50
0
1997
2001
2005
2008
1997
2001
2005
2008
1997
Source: Claessens, S., and N. van Horen (2011); emerging Europe updated based on EBRD transition indicators for 2006
onwards. Other emerging markets have been kept constant at their 2005 level.
Work in Progress – Preliminary Findings
25
Financial Flows in Europe have been more stable
Foreign Finance is Stabler the Closer a Country is to the EU
(Banking flows to emerging markets during crises, quarterly data; t = 100)
110
100
90
80
70
60
50
40
30
20
t-12 t-10
t-8
t-6
t-4
t-2
EU10 (September 2008)
EU Neighborhood (September 2008)
t
t+2
t+4
t+6
t+8 t+10 t+12
EU Candidates (September 2008)
Asian Crisis (June 1997)
Source: BIS Locational Statistics and World bank. Note: Based on quarterly data as of March 2011; exchange rate adjusted values.
Crisis timing date is defined in parentheses. Asian crisis countries include Indonesia, Korea, Malaysia, Philippines and Thailand.
Work in Progress – Preliminary Findings
26
Financial flows varied
Emerging Europe has Lower Levels of Public and Private Debt
(Aggregate exposure of the public and private sectors, % of GDP, 2004 and 2009)
Public Sector Debt, 2004 to 2009
EU10
EU Candidates
EU Neighborhood
100
80
HUN
60
ALB
LAC (2009)
40
EU10
20
EU Cohesion
POL
Asia (2009)
SVK CZE SVN LVA
LAC (2009)
EU Candidates
LTU
ROM
EU Cohesion
TUR
LAC (2009)
ARM
Asia (2009)
BIH
HRV
EU Cohesion
Asia (2009)
GEO
UKR
EU Neighborhood
MKD
BGR
EST
0
0
100
200
0
100
200
0
100
200
Total Private Sector Credit, 2004 to 2009
Source: Eurostat, World Bank calculations. Notes: Arrows begin in 2004 and end in 2009.
Work in Progress – Preliminary Findings
27
Household debt has risen, but is lower than EU15
Household Indebtedness Rose, but Remains Well Below EU15 Levels
(Total household debt, % of GDP, 2000 to 2009)
EU10
EU Candidates
EU Neighborhood
60
60
60
50
50
50
40
40
40
30
30
30
20
20
20
10
10
10
0
0
2000
2003
BGR
POL
CZE
ROM
2006
EST
SVK
HUN
SVN
2009
LTU
EU15
LVA
0
2000
2003
ALB
MNE
BIH
SRB
2006
HRV
TUR
2009
MKD
EU15
2000
2003
ARM
MDA
AZE
UKR
2006
BLR
EU15
2009
GEO
Source: EBRD Transition Indicators, European Credit Institute, and authors’ calculations. Note: Includes all types of household debt.
Work in Progress – Preliminary Findings
28
§ Question Five
Are enterprises in Europe over-regulated?
29
European Enterprises have largely delivered
European enterprises have done well since the mid 1990s
Growth performance of European sub-regions and benchmark countries, 1995 to 2009
Employment
Productivity
Participation 95 *
EFTA
74
EU15
EU12
Neighboring
33
USA
70
Japan
2.0
59
4.4
2.9
51
17
2.8
41
4.3
22
56
0.6
7.8
3.8
3.2
13
10
21
22
11
9
13
67
53
19
22
0.1
35
11
24
0.2
33
24
32
4.6 -1.5
28
China
75
1.3
39
60
50
27
57
2.4
40
35
1.6
2.6
51
36
15
1.1
1.3
47
Brazil
Russia
7.6
70 0.0
LAC
34
30
1.0
66
East Asia
3.1
49
42
54
2.5
Goods/SVC
Export / GDP ‘09
36
62
1.1
1.1
Goods/SVC
Export / GDP ‘95
61
1.0
2.3
N.America&Occ.
PPP-adjusted
level ’09; $K
1.7
2.4
52
31
India
1.3
48
Accession
Annual Growth
95-09 **
1.5
57
Perip
Africa
Annual Growth
95-09 **
Export
23
30
25
7
11
20
11
27
20
29
28
Source: World Bank staff, based on WDI and ILO KILM
Work in Progress – Preliminary Findings
30
Employment, productivity and exports
The East giving chase, the South lagging in productivity growth and exports
Employment, productivity and exports, 2002-2007
EU-27
Sub-regions
EU-15
North
Employment
growth
(annual %; 02-07)
EU-15
Continental
EU-15
South
EU-12
Continental
EU-12
South
EU-12
North
5.4
1.9
1.3
1.5
2.8
3.3
1.5
7.9
8.7
6.7
Productivity
growth
(annual %; 02-07) 1.7
2.7
1.8
0.1
60
49
Export over GDP
(%; 2007)
46
36
54
42
28
Source: World Bank staff, based on Eurostat, WDI
Work in Progress – Preliminary Findings
31
A region of exporters
Exporting—Central Europe’s specialty
Export share in GDP, 2002 and 2008
2002 2008
EU15-North
EU15Continental
EU15-South
EU12Continental
EU12-East
EU12-North
58
56
53
47
38
42
39
38
38
34
26
28
Source: World Bank staff, based on World Development Indicators.
Work in Progress – Preliminary Findings
32
A region of investors
The East has become more attractive to investors, the South less
FDI inflows into Europe, all sectors, 1985-2009
Europe total 1,200
FDI inflow
1,000
($ billion)
800
600
400
200
0
Inflow share
among subregions
(%)
100%
EU15 South
80%
EU15 North,
Continental,
EFTA
60%
40%
Accession/
Neighboring
20%
0%
1985
EU12
1990
1995
2000
2005
2009
Source: World Bank staff, based on UNCTAD data.
Work in Progress – Preliminary Findings
33
Varying productivity levels—quite normal
Productivity levels were lower in the South and lower still in the East
Average value added per worker in 2002, thousands of 2005 US$
EU15-North
71
63 60
EU15-Continental
66
EU15-South
EU12South
EU12-Continental
EU12-North
71
61 59 60
63
49
45
36
26
15 16 16 16
22
7
5
9 10
14
GBR SWE DNK FIN DEU FRA NLD BEL AUT ITA ESP GRC PRT POL CZE HUN SVK SVN ROM BGR LTU LVA EST
Work in Progress – Preliminary Findings
34
Diverging productivity—not normal
The East has been catching up, the south has been falling behind
Average productivity growth in EU27, annual rates, 2002-2007
EU15-North
EU15-Continental
EU15-South
EU12South
EU12-Continental
EU12-North
11.7
9.4
7.6
6.2
5.7 6.0
8.8 8.9
6.4
7.2
4.4
3.8
2.5
0.9
1.7 2.0 1.5 1.2 1.9
0.6
0.1
-0.1
-1.8
GBR SWE DNK FIN DEU FRA NLD BEL AUT
ITA
ESP GRC PRT POL CZE HUN SVK SVN ROM BGR LTU LVA EST
Work in Progress – Preliminary Findings
35
FDI helps make enterprises productive
Foreign firm are more productive
Productivity 2008 and growth of value added, 2003-2008
Average productivity 2008
1,000 USD per employee
Annual value add growth
%; 2003-2008
45
Czech Republic
54
26
Poland
7.1
49
12.4
25
Slovenia
5.6
41
10.1
23
Croatia
4.1
34
6.6
22
19
Estonia
2.4
2.9
12
BiH
10.4
17
14.0
17
14
Serbia
10.4
14.3
11
12
Romania
Ukraine
Domestic
Foreign
3.8
4.3
4
5
5.9
2.6
-1.6
3.7
Source: World Bank staff, based on Amadeus
Work in Progress – Preliminary Findings
36
Multinational enterprises are more productive
In the EU-15, firms with a foreign presence are more productive and grow faster
Productivity levels 2008 and growth of value added, 2003 to 2008
Productivity level
1,000 USD per employee; 2008
70
France
3.7
137
47
4.8
-0.9
111
79
3.4
1.0
110
71
2.0
0.9
103
3.5
75
Sweden
Finland
3.6
68
Belgium
Italy
Domestic
International
0.9
149
Norway
Spain
Annual value add growth
%; 2003-2008
3.2
102
63
4.4
2.2
87
4.8
Source: World Bank staff, based on Amadeus.
Work in Progress – Preliminary Findings
37
What helps enterprise in emerging Europe?
Infrastructure, credit, FDI, and regulations improve firm performance in the EU-12
Correlation between country dummies and policy variables in EU-12 countries
Skills
Credit
Inward FDI
Outward FDI
Business
environment
Manufacturing
Services
0.79
0.76
Infrastructure
0.41
0.33
0.57
0.33
0.40
0.31
trde
Entry
Operation
Institutional
0.74
0.68
empl
0.65
0.58
0.52
0.57
permt
tax
0.44
0.36
Source: World Bank staff, based on Amadeus data.
Work in Progress – Preliminary Findings
38
What helps enterprise in advanced Europe?
FDI (manufacturing) and regulations (services) are the correlates of productivity in the EU-15
Correlation between country dummies and policy variables
Manufacturing
Services
Skills
start
0.39
0.49
Infrastructure
closing
Inward FDI
0.37
property
Outward FDI
Business
environment
0.53
Entry
0.41
Operation
Institutional
0.35
trde
0.37
empl
0.39
0.57
permt
tax
Source: World Bank staff, based on Amadeus
Work in Progress – Preliminary Findings
39
§ Question Six
Are Europe’s innovation fundamentals flawed?
40
Europe has some of the most innovative economies
Europe’s leaders invest as much in R&D as the US and Japan
3
R&D Expenditure:
Business
Public
% of GDP
2.5
2
1.5
1
MKD
CYP
SRB
GRC
BGR
LVA
POL
ROM
SVK
LTU
TUR
MLT
HRV
EST
ITA
HUN
ESP
PRT
NLD
CZE
NOR
GBR
IRL
SVN
LUX
EU27
BEL
FRA
ISL
DEU
AUT
DNK
CHE
SWE
FIN
0
IND
BRA
RUS
CHN
USA
JPN
.5
Source: IUS (2010).
Work in Progress – Preliminary Findings
41
Europe does less well in R&D-intensive sectors
Europe specializes in sectors with medium R&D intensity, the US in high intensity
Relative Technological Advantage (RTA) indices by sector
Europe
US
Aerospace & Defense
1.50
1.13
Computer hardware & services
0.08
1.39
Health care equipment & services
0.70
1.86
Internet
0.00
2.54
Pharmaceuticals
1.27
1.16
Semiconductors
0.50
1.72
Software
0.51
2.05
Telecommunications equipment
1.38
1.09
Note: RTA are calculated as the share of the region in total sectoral R&D relative to the share of the region in overall R&D. A RTA
value higher than 1 reflects that the region is technology specialized in this
Source: Bruegel and World Bank, on the basis of IPTS R&D Scoreboard data
Work in Progress – Preliminary Findings
42
Europe’s innovation deficit: Fewer “Yollies”
Yollies spend the most on R&D and US Yollies are the most R&D intensive
10
8
6
4
2
0
Europe
USA
All Firms
JPN
RoW
Yollies
World
Ollies
Source: Bruegel and World Bank, on the basis of IPTS R&D Scoreboard data
Work in Progress – Preliminary Findings
43
§ Question Seven
Are Europe’s workers making it uncompetitive?
44
The European Work Model
A trade-off between flexibility and security?
6
Relative Position of countries in terms of Protection and Flexibility
4
DNK
BEL
Protection
0
2
FRA
SWE
NLD FIN
NOR
ESP
PRT
DEU
CHE
AUT
SVN
IRL
SRB
POL HUN
ROU
GRC
SVK ITA
HRV
B&H
LTU
LVA
-2
MAC
BGR
CZE
TUR
GBR
EST
NZD
UKR
AUS
CAN
MDA
MNE
ARM
AZE
ALB
JPN
KOR
GEO
MEX
US
-2
-1
0
1
2
3
Flexibility
EU-15+
Other OECD countries
ECA
Note: The graph is based on 1st. principal components of Protection and Flexibility. Higher values indicate more Protection and More Flexibility
Work in Progress – Preliminary Findings
45
A deficit of young people
To keep the labor force stable Europeans have to work longer, but a demographic deficit
of young people will persist
Change in Labor Force Between 2005 and 2050 by Variant and Age Group (millions)
40
30
20
Varian t V: m axim um
variant
10
0
Va rian t IV : increase in
Varian t II: converg ence
retirem ent age by 10 yrs
to Europ ea n benchm ark
countries
Variant III: convergence
fem ale to m ale
-10
-20
-30
Variant I: base variant
-40
-50
15 -39
40 -64
6 5-74
Source: Koettl (2010) using UN (2005), ILO (1997)
Work in Progress – Preliminary Findings
46
If older workers stop retiring so soon
Europeans are retiring at earlier ages than they used to
Change in the average effective retirement age of men, number of years difference 1965-2007.
6
4
2
0
-2
-4
-6
-8
-10
-12
-14
a
re
o
K
y
an
m
r
e
G
icl
b
u
p
e
R
hc
ez
C
icl
b
u
p
e
R
ka
v
o
lS
d
na
l
ceI
d
na
la
eZ
w
e
N
n
e
d
e
w
S
ad
a
n
a
C
n
a
ap
J
ial
ar
ts
u
A
s
te
at
S
d
e
it
n
U
ya
rw
o
N
m
u
gil
e
B
m
o
d
gn
i
K
d
e
ti
n
U
rka
m
n
e
D
e
c
e
e
r
G
s
d
n
al
r
e
th
e
N
lya
tI
d
n
la
in
F
rg
u
o
b
m
e
x
u
L
alg
tu
r
o
P
d
n
lar
e
zt
i
w
S
d
an
l
re
I
iar
ts
u
A
o
icx
e
M
in
a
p
S
e
c
an
rF
yr
ag
n
u
H
y
ke
r
u
T
d
n
la
o
P
Source: World Bank staff, using OECD data
Work in Progress – Preliminary Findings
47
Europeans are less mobile, even within countries
Europeans are less mobile than Americans and Asians
Annual cross-border labor mobility, Per cent of the working-age population, 2000-05
US: between 50 states
3.1
Japan: between TL2 level regions
2.2
Australia: between 8 states/territories
2.0
EU15: between NUTS-1 regions within countries
1.0
Canada: between 10 provinces/territories
1.0
EU 27: between NUTS-2 regions within countries
0.8
Canada: between Quebec and 9 other provinces
0.4
EU: commuting across borders
0.4
EU15: between 15 countries
0.1
Source: Eurobarometer (2005), US Census Bureau, Current Population Survey; Eurostat, Labor Force
Statistics; Statistics Canada; OECD(2005), Employment Outlook, Chapter 2.
Work in Progress – Preliminary Findings
48
§ Question Eight
Are governments in Europe too big?
49
Public spending (as a share of GDP) has increased
Governments in Europe are Bigger
The world resized by government spending in dollars, 2009
Source: World Bank staff.
Source: OECD, IMF, and WB.
Work in Progress – Preliminary Findings
50
Main reason for bigger government: higher
social protection spending
About 90 percent of the size difference is due to spending on social protection
From Gross Public to Net Publicly Mandated Social Protection Spending for OECD countries in 2007
Work in Progress – Preliminary Findings
51
Pension spending is the most critical component
Southern Europe spends the most on pensions in the world
Public Pensions as Percent of GDP, 1995-2000 and 2007-2008
Work in Progress – Preliminary Findings
52
Pension levels are not the problem—early eligibility is
Real Public Pensions Per Elderly, 1980 and 2007
Work in Progress – Preliminary Findings
53
Europe’s Growth Agenda?
Government
Demographic
Shifts
Labor
Innovation
Productivity
Growth
Enterprise
Finance
Modern
Services
Trade
Work in Progress – Preliminary Findings
54