OECD

Productivity-enhancing reallocation during the Covid-19 pandemic

Retrieved on: 
Tuesday, June 18, 2024

The focus is on the reallocation channel and productivity-enhancing reallocation of jobs, following Foster et al., 2016.

Key Points: 
    • The focus is on the reallocation channel and productivity-enhancing reallocation of jobs, following Foster et al., 2016.
    • Our study builds upon prior research concerning the impact of crises on productivity growth and labour reallocation, contributing to the comparative analysis of Covid-19?s effects on productivity.
    • Were heightened levels of labour reallocation observed amidst the economic downturn of the pandemic?
    • Did the trajectory of productivity and reallocation amid the pandemic diverge from patterns observed during other crises?
    • Moreover, did the extensive policy interventions aimed at supporting firms during the pandemic adversely affect productivity and productivity-enhancing reallocation?
    • However, a longitudinal perspective reveals that productivity-enhancing reallocation, on average, exhibited somewhat subdued trends during the Covid-19 pandemic compared to the Great Recession.
    • In this paper, we ask what the impact of the pandemic was on labour reallocation and thereby on productivity.
    • The substantial policy measures that were taken to mitigate the shock of Covid-19 might have reduced productivity-enhancing reallocation.
    • We follow this line of research and contribute by studying productivityenhancing reallocation and job retention support in a much larger set of 11 European countries.
    • We apply the approach of Foster et al., 2016 by estimating productivity-enhancing reallocation as the sensitivity of a firm?s employment growth to its lagged relative productivity.
    • We take the approach of Foster et al., 2016 in this paper as it allows direct comparison of our results with many empirical papers on productivity-enhancing reallocation.
    • However, productivity-enhancing reallocation was somewhat weaker on average during the Covid-19 pandemic than during the Great Recession.
    • The relationship between the intensity of the job retention support and the change in productivity-enhancing reallocation is negative at the country level in 2020, suggesting that reallocation contributed less to productivity in countries that gave more widespread support for jobs.
    • After conditioning on participation, the relationship between firm productivity and relative support size is negative in all the sample countries.
    • Combining the results for participation in support with the size of the support and productivity-enhancing reallocation suggests that the countries that supported relatively more low-productive firms recorded lower increases in productivity-enhancing reallocation during the pandemic.
    • This means that the characteristics of the job retention support, and in particular its extent and effectiveness in targeting highproductivity firms, played a part in productivity-enhancing reallocation during the pandemic.
    • Our findings on the link between weaker productivity-enhancing reallocation in the pandemic and the potential role of job retention support are subject to many limitations.
    • We can provide the long-run comparative evidence on reallocation and productivity for only eight sample countries and estimate the targeting of the support for only five countries.
    • The estimates of the productivity-enhancing reallocation have occasionally large confidence bounds and changes in the reallocation pattern are rarely statistically significant.
    • Section 4.1 shows the results of productivity-enhancing reallocation, Section 4.2 connects the reallocation with pandemic job retention support and Section 4.3 provides details on the distribution of job retention support by firm productivity.
    • The decomposition of productivity growth shows a negative within-firm margin and a positive between-firm reallocation margin; see Figure 2.
    • We follow Baily et al., 1992 and decompose overall productivity growth into within-firm growth and the reallocation between firms3 .
    • The between-firm labour reallocation channel lifted aggregate productivity in the euro area by 1-3 percentage points in 2020.
    • Bloom et al., 2020 estimate that only half or two thirds of the contribution of between-firm reallocation to productivity came from inter-industry reallocation, so that intra-industry reallocation also played a substantial role.
    • Further analysis is needed to understand the role of within-sector reallocation and the extent of productivity-enhancing reallocation, and we conduct this analysis in the forthcoming sections.
    • The descriptive statistics of the variables used in the estimates of productivity-enhancing reallocation are shown in Table 1 and the size of sample firms in Table A2.
    • These results confirm that high-productivity firms had higher employment growth on average than low-productivity firms from 2015 to 2020, and the reallocation remained productivity-enhancing.
    • Supplementary estimates from an unbalanced panel of firms for 2015-2020 (Table A4) show a similar degree of productivity-enhancing reallocation.
    • The reallocation to productivity contributes more in other countries and is highest in 2015 to 2020 in Latvia, where it contributes 5.2 log points.
    • Back-of-the-envelope calculations show that the slow-down in reallocation is in the magnitude of half of the decline in aggregate productivity growth.
    • Observations R2 Firm size Sector Year Relprodi,t?1 ? Cycler,t Cycler,t Relprodi,t?1 EE Table 2: Productivity-enhancing reallocation, OLS model estimates for the balanced panel, 2015-2020 Next, we examine the cyclicality of productivity-enhancing reallocation, taking the increase in productivity-enhancing reallocation during the recessions as evidence of creative destruction or the cleansing effect.
    • While there ECB Working Paper Series No 2947 19 is only one country out of ten where the productivity-enhancing reallocation increased during the Covid-19 crisis7 .
    • Figure 3 suggests that the countries that supported more workers had a smaller increase in productivity-enhancing reallocation in 2020.
    • The design of the job retention support may also explain why the reaction of reallocation was different in different countries.
    • However, the intensity of support cannot explain the majority of the variation in crosscountry differences in productivity-enhancing reallocation.
    • The COVID-19 shock and productivityenhancing reallocation in Australia: Real-time evidence from Single Touch Payroll (OECD Economics Department Working Papers No.

Verde highlights potential to reduce the carbon footprint of Brazil's biofuel supply chain

Retrieved on: 
Tuesday, June 4, 2024

In addition, the replacement of KCl with K Forte® in biofuel agricultural production could significantly contribute to a more environmentally responsible supply chain”, stated Cristiano Veloso, Verde’s Founder and CEO.

Key Points: 
  • In addition, the replacement of KCl with K Forte® in biofuel agricultural production could significantly contribute to a more environmentally responsible supply chain”, stated Cristiano Veloso, Verde’s Founder and CEO.
  • Additionally, it seeks to promote the expansion of biofuel production and use within Brazil’s energy matrix, ensuring a consistent fuel supply.
  • For biofuel distribution and usage, RenovaCalc relies on official and sectoral statistics and a tool for estimating greenhouse gases for intersectoral sources.
  • Brazil is advancing its agenda for reducing GHG from agriculture through the "Adaptation and Low Carbon Emission Plan in Agriculture - ABC+" (2020-2030).

BDO Survey Reveals Tax Leaders Face Growing Demands, but Fewer Resources

Retrieved on: 
Monday, June 10, 2024

Yet the survey also reveals that many tax leaders lack the resources necessary to execute these mandates.

Key Points: 
  • Yet the survey also reveals that many tax leaders lack the resources necessary to execute these mandates.
  • View the full release here: https://www.businesswire.com/news/home/20240610637156/en/
    The 2024 survey shows that fewer tax leaders are operating at a highly strategic level, compared to last year’s study.
  • Instead, more survey participants fell into the Tax Tactician category – tax leaders who contribute strategically to the business but are more often consulted after business decisions are made.
  • By continuing to demonstrate the tax team’s credibility as a source of insight and value, more tax leaders can become Tax Strategists.

Wolters Kluwer Reports Significant Uptake in adoption of BEPS Pillar Two Initiative Among Multinational Corporations

Retrieved on: 
Monday, June 10, 2024

Wolters Kluwer Tax & Accounting (TAA) Asia Pacific (APAC) today revealed that data from the BEPS Pillar Two Readiness Index Report Q1 2024 highlights encouraging trends in compliance.

Key Points: 
  • Wolters Kluwer Tax & Accounting (TAA) Asia Pacific (APAC) today revealed that data from the BEPS Pillar Two Readiness Index Report Q1 2024 highlights encouraging trends in compliance.
  • The BEPS Pillar Two Readiness Index serves as a barometer to assess readiness among global tax jurisdictions subject to BEPS Pillar Two measures.
  • The company currently offers solutions developed to aid customers to prepare and comply with BEPs Pillar Two requirements.
  • Wolters Kluwer CCH Integrator BEPS Pillar Two solution was designed specifically to assist multinational corporate tax departments as they seek to simplify and streamline reporting obligations.

Some online platforms are starting to measure ‘student engagement’ at school. Here’s what you need to know

Retrieved on: 
Wednesday, June 12, 2024

“Edtech” (education technology) companies are offering a potential solution to schools through engagement data.

Key Points: 
  • “Edtech” (education technology) companies are offering a potential solution to schools through engagement data.
  • These data measure students’ engagement automatically and in real time.

What is engagement technology?

  • It could be for any subject and for learning students need to do in class or at home.
  • Currently, engagement data are more common in tertiary education, where systems such as Moodle and Brightspace are used to deliver online content.
  • But engagement data are also finding their way into schools.
  • At the same time it provides analytics on students’ engagement, including the time students have spent on activities and the total number of activities they have completed.

Academic theories of engagement

  • Through engagement data, online learning platforms promote the idea engagement is measurable and can be expressed in numbers and graphs.
  • But it is a very limited idea compared to most academic theories of engagement used by education researchers today.

What is engagement data measuring?

  • We also have to question whether engagement data are measuring what digital platforms claim to measure.
  • Task completion might be a more valid way of measuring engagement, but the mere completion of tasks is also a very narrow conception of engagement.

Is this data useful?

  • From a teacher’s perspective, it might be useful to know if a student has not been active at all on the platform.
  • Some of these measurements are also quite common on social media platforms where companies aim to quantify user engagement.

Biometric data can also be measured

  • While it is not a feature in Australian schools, online learning platforms may use biometic data to measure students’ engagement.
  • This involves using headsets or cameras to track students’ brainwaves or eye movements to see if they are paying attention.

How are engagement data used?

To-do list got you down? Understanding the psychology of goals can help tick things off – and keep you on track

Retrieved on: 
Wednesday, June 12, 2024

According to the OECD Better Life Index, 12.5% of Australians report working at least 50 hours a week, higher than the OECD average.

Key Points: 
  • According to the OECD Better Life Index, 12.5% of Australians report working at least 50 hours a week, higher than the OECD average.
  • Psychology has long been interested in our goals – our mental representations of desirable outcomes.
  • Much of this research is on how we form, pursue and attain goals, plus how goals make us feel.

Make a list

  • Most of us approach multiple goals with the age-old “to-do” list.
  • Then you “check” or tick things off as you do them.
  • One reason to-do lists are useful is because we are more likely to remember things we haven’t completed, rather than things we have.

Finding your why

  • Researchers have focused a lot on the psychology of why people pursue goals – and how this affects their approach to tasks.
  • For example, some people want to complete a university degree because they want to get a job.
  • Goals that feel like our own, and for which we experience a sense of intrinsic motivation, are known as “self-concordant”.

Juggling goals – 4 to-do tips

Eurosystem staff macroeconomic projections for the euro area, June 2024

Retrieved on: 
Wednesday, June 12, 2024

Firm-level estimates suggest that a 1 percentage point increase in the profit margin of a firm raises the likelihood of that firm hoarding labour by 0.2 percentage points.

Key Points: 
  • Firm-level estimates suggest that a 1 percentage point increase in the profit margin of a firm raises the likelihood of that firm hoarding labour by 0.2 percentage points.
  • This suggests that the higher profit margins of firms in recent years have, on average, improved their ability to hoard labour when their own economic outlook has worsened.

Intangible assets of multinational enterprises in Ireland and their impact on euro area activity

Retrieved on: 
Wednesday, June 12, 2024
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In euro area countries other than Ireland, estimates point to IPP transfers having a relatively limited impact on overall country-level output for the present, and little effect on euro area GDP or its expenditure components.

Key Points: 
    • In euro area countries other than Ireland, estimates point to IPP transfers having a relatively limited impact on overall country-level output for the present, and little effect on euro area GDP or its expenditure components.
    • Transfers of intangible assets to and from Ireland have caused significant volatility in the expenditure components of euro area GDP.
    • These effects have propelled Ireland from a weight of approximately 1% of euro area GDP in 1999 to around 5% by 2023.
    • The euro area current account and capital stock are also affected by MNE activities (see Section 4).
    • Complementing the headline series with these smoother modified series facilitates economic assessment of the euro area (see Section 5).
    • ECB Occasional Paper Series No 350 5 1 Introduction Multinational Enterprises (MNEs) have become an increasingly important feature of the euro area economy.
    • In addition, the profits of some of the world?s largest MNEs derive mainly from intangible assets (software, patents and other IPPs).
    • Most of this increase is driven by global corporations across a wide range of sectors with head offices that are established outside the euro area.
    • For some countries, such as Slovakia, MNE activity is mostly driven by companies headquartered in other euro area countries, while Ireland stands out with the highest share of MNEs with headquarters outside the euro area.
    • ECB Occasional Paper Series No 350 7 Chart 1 Non-domestic MNE share of output across euro area countries (percentages of gross national output) 2019 2005 intra euro area intra euro area 45 40 35 30 25 20 15 10 5 0 EA IE LU SK MT NL SI BE EE LV AT LT PT DE ES FI IT FR CY GR Sources: Organization for Economic Co-operation and Development ? Activity of Multinational Enterprises (OECD AMNE) database and own calculations.
    • Intra-euro area refers to production in the respective country by firms headquartered in another euro area country.
    • While intangible assets are an important factor in production in knowledge-intensive industries, they also play a pivotal role in the tax-optimisation activities of MNEs.
    • By transferring such assets to countries with an attractive corporate tax system, MNEs can reduce the tax burden on income streams they derive from these assets.
    • Chief among these, in terms of their effect on euro area measures of output, is the classification of R&D as capital formation of IPPs.
    • ECB Occasional Paper Series No 350 9 3 MNE activities across euro area countries with area-wide impacts MNE activities may have a disproportionate impact on national output, especially for smaller countries.
    • First, intangible investment and imports of R&D services, reflecting the growing importance of intangible assets and the relative ease with which these can be relocated across borders (see Section 2).
    • For instance, the share of IPPs to GDP is larger in Ireland and Malta, as well as in France14 and Austria, than in the euro area as a whole (Chart 3).
    • Merchanting as a share of GDP is also relatively high in Ireland, Luxembourg and Cyprus.15 MNE activities in Ireland are reviewed in detail in the sub-section below.
    • 17 In Ireland, the CSO reports that ?beginning in 2008 [?], a number of multinational corporations relocated their group headquarters to Ireland.
    • Over time, the onshoring of intangible assets has boosted Ireland?s GDP by generating large exports highly concentrated with certain firms.
    • The grey range shows the minimum and maximum values for the four largest euro area countries, namely Germany, France, Italy and Spain.
    • Chart 12 Contribution of Ireland to changes in euro area real GDP (cumulated increases in euro area GDP from Q4 2014 to Q4 2023 in ? trillions) Euro area Euro area excluding Ireland Ireland 8 7 6 5 4 3 2 1 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 Sources: Eurostat and own calculations.
    • 4.3 Impact on the euro area current account Cross-border production arrangements and merchanting activities related to MNEs affect the trade balance in the euro area current account (see Box 1).
    • Notes: The green area is the net exports of the euro area as recorded in trade statistics.
    • ECB Occasional Paper Series No 350 22 Impact on euro area capital stock 4.4 Intangible asset transfers also affect euro area capital stock.
    • Andersson, M., Byrne, S., Emter, L., Gonzalez, B. and Jarvis, V. (2023), ?Intangible assets of multinational enterprises in Ireland and their impact on euro area GDP?, Economic Bulletin, Issue 3, European Central Bank, Frankfurt am Main.
    • (2021), ?The euro area capital stock since the beginning of the COVID19 pandemic?, Economic Bulletin, Issue 2, European Central Bank, Frankfurt am Main.

Digital innovation and banking regulation

Retrieved on: 
Wednesday, June 12, 2024
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Contents Abstract 2 Non-technical summary 3 1 Introduction 5 2 The promises and perils of digital innovation 6 3 The EU fosters digital trends 8 3.1 A level playing field for providers and deployers of AI systems 8 3.2 Cross-sectoral regulation of markets for crypto-assets 10 3.3 Oversight of critical cloud computing service providers 11 4 Banking regulation and digital trends 14 4.1 Gaps in banking regulation 14 4.2 How to foster a risk-based prudential framework 15 4.3 Market discipline through harmonised Pillar 3 disclosures 17 5 Conclusion 18 6 References 20 Digital innovation and banking regulation 1 Abstract The European Union is aiming to foster digital transformation in all sectors by 2030.

Key Points: 
    • Contents Abstract 2 Non-technical summary 3 1 Introduction 5 2 The promises and perils of digital innovation 6 3 The EU fosters digital trends 8 3.1 A level playing field for providers and deployers of AI systems 8 3.2 Cross-sectoral regulation of markets for crypto-assets 10 3.3 Oversight of critical cloud computing service providers 11 4 Banking regulation and digital trends 14 4.1 Gaps in banking regulation 14 4.2 How to foster a risk-based prudential framework 15 4.3 Market discipline through harmonised Pillar 3 disclosures 17 5 Conclusion 18 6 References 20 Digital innovation and banking regulation 1 Abstract The European Union is aiming to foster digital transformation in all sectors by 2030.
    • This paper discusses digital innovation in the banking sector in the context of the academic literature on financial innovation and non-banks.
    • The paper examines the digital transformation of European banks in the context of broader academic research into financial innovation and non-banks.
    • The ?dual nature of financial innovation? theory posits that cycles of prosperity arising from financial innovation are followed by cycles of severe disruption.
    • The challenges are not new, but the question remains: how should digital innovation in the banking sector be regulated?
    • To meet this need, the paper suggests initiating digital innovation plans drawn up by banks for five years, but updated annually.
    • The digital trends discussed in this paper include artificial intelligence (AI), crypto-assets and cloud computing services, which are all contemporary forms of financial innovation.
    • ?he Digital Finance Strategy sets out the EU?s commitment to creating a safe environment for digital financial service providers and their customers by attaining four objectives by 2030: (i) remove fragmentation in the digital single market, (ii) adapt the regulatory framework to facilitate digital innovation, (iii) promote data-driven innovation by creating a common financial data space, and (iv) address the challenges and risks from digital transformation.
    • To address the possibility of overreliance on digital innovation, this paper provides recommendations to shape a system of banking regulation that is fit for purpose.
    • The paper concludes that EU banking regulation should more purposefully reflect digital trends and the need for a state-of-the-art prudential and disclosure framework to promote the goal of adapting the regulatory framework to facilitate digital innovation.
    • Section 3 discusses how the EU is fostering digital trends in three specific regulations (the AI Act, MiCa and DORA).
    • Section 4 discusses the limitations of the current banking regulatory framework when it comes to reflecting risks from digital trends.
    • 5 See Digital Finance Strategy for the EU and 2030 Digital Compass: the European way for the Digital Decade.
    • These failures have not been prevented in the past owing to regulatory capture and overreliance on the promises of innovation (Hellwig, 2009).
    • Analysis of the 2008 financial crisis has shown the connection between increased demand for collateral in unregulated shadow banking markets and the financial innovation of securitised subprime mortgages (Gorton, 2010).
    • The fact that shadow banking was allowed to blossom and compete with commercial banking without appropriate regulation and supervision was one of the root causes of the financial crisis.
    • Regulatory and supervisory innovation need to accompany financial innovation.
    • Banking supervisors should also consider using regulatory sandboxes to remain technologically up-to-date Given the interest in AI tools for banking services, European banking supervisors will need to consider setting up regulatory sandboxes to ensure they remain technologically savvy about the risks and opportunities associated with supervised banks? use of digital trends.
    • Digital innovation challenges the barriers between banks, regulated entities and other commercial entities whose services are essential for regulated ones.
    • Digital innovation plans are suggested as a means of providing a comprehensive overview of all the risks to which a bank is exposed by using various types of digital trends.