1. The Norwegian Economy NORWEGIAN LIFE AND SOCIETY (NORINT0500) Thomas von Brasch: vonbrasch@gmail.com

2. Plan for the lecture Wealth and productivity in Norway –The Norwegian Productivity Puzzle Other statistical facts about Norway Current macroeconomic situation –Four important stabilising mechanisms Thomas von Brasch: vonbrasch@gmail.com

3. How wealthy is Norway?

4. Thomas von Brasch: vonbrasch@gmail.com National income per capita, Current prices, Norway=1

5. Thomas von Brasch: vonbrasch@gmail.com Why are we so wealthy?

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7. Sources of wealth Thomas von Brasch: vonbrasch@gmail.com

8. Reasons to worry? Thomas von Brasch: vonbrasch@gmail.com

9. Contributions to labour productivity growth Thomas von Brasch: vonbrasch@gmail.com

10. Main drivers of TFP Human capital –Level of education –ICT knowledge Research and development Thomas von Brasch: vonbrasch@gmail.com

11. Level of education Thomas von Brasch: vonbrasch@gmail.com Johansson, Å. et al. (2013), “Long-Term Growth Scenarios”, OECD Economics Department Working Papers, No. 1000, OECD Publishing. http://dx.doi.org/10.1787/5k4ddxpr2fmr-en

12. PISA 2012 Thomas von Brasch: vonbrasch@gmail.com

13. ICT knowledge Thomas von Brasch: vonbrasch@gmail.com

14. ICT knowledge Thomas von Brasch: vonbrasch@gmail.com OECD (2014), Measuring the Digital Economy: A New Perspective, OECD Publishing. http://dx.doi.org/10.1787/9789264221796-en

15. ICT knowledge Thomas von Brasch: vonbrasch@gmail.com OECD (2014), Measuring the Digital Economy: A New Perspective, OECD Publishing. http://dx.doi.org/10.1787/9789264221796-en

16. R&D and productivity growth (1986 - 2008) Thomas von Brasch: vonbrasch@gmail.com

17. The Norwegian Puzzle “There is a puzzle about Norway. How did it succeed in reaching one of the highest living standards among OECD countries from a relatively poor ranking in 1970?”(p. 18) “Productivity is high, real growth rates have been respectable, overall TFP growth is better than in many countries with higher R&D spending, and industry has by and large managed to survive a changing world and a strong exchange rate” (p. 129) Source: OECD (2007), Economic Surveys: Norway, January (2). Thomas von Brasch: vonbrasch@gmail.com

18. Labour productivity Thomas von Brasch: vonbrasch@gmail.com GDP per hour, relative to USA in 2013. Converted to USD using economy wide purchasing power parities. Sources: OECD og SSB.

19. Productivity and Purchasing Power Parities Productivity refers to the volume of outputs relative to the volume of inputs But the value of production is measured in different currencies How should the value of production be compared across countries? Thomas von Brasch: vonbrasch@gmail.com

20. Productivity and Purchasing Power Parities Thomas von Brasch: vonbrasch@gmail.com

21. Impact from industry composition on productivity Thomas von Brasch: vonbrasch@gmail.com

22. Impact from industry composition on productivity Thomas von Brasch: vonbrasch@gmail.com

23. Productivity (in time and space) Thomas von Brasch: vonbrasch@gmail.com Sources: OECD og EUKLEMS. Gross product per hour. USD, basic prices. All industries except oil and electronics.

24. International comparisons 4/5 Thomas von Brasch: vonbrasch@gmail.com

25. R&D: controlling for industry composition Thomas von Brasch: vonbrasch@gmail.com Business R&D intensity, OECD average Andrews, Criscuolo, 2013, Knowledge-based capital, innovation and resource Allocation, OECD Economic Policy Papers (4)

26. The Norwegian Puzzle Not that low R&D investments Not as productive as previously believed Not as puzzling after all Thomas von Brasch: vonbrasch@gmail.com

27. Break

28. Thomas von Brasch: vonbrasch@gmail.com Can one compare productivity between countries with different industry structures?

29. Thomas von Brasch: vonbrasch@gmail.com Argentina vs. Norway

30. Sectoral composition and productivity Thomas von Brasch: vonbrasch@gmail.com

31. Sectoral composition and productivity Thomas von Brasch: vonbrasch@gmail.com

32. Equal sectoral composition? Thomas von Brasch: vonbrasch@gmail.com Common production relative to total production, Manufacturing, 2013. Source: Eurostat, PRODCOM database 2013. Average of the shares for Norway and the comparison country. ISO country codes.

33. Equal sectoral composition? Norway vs. Denmark NORDNKProduct 0,0720Unwrought aluminium alloys 0,0580Offshore vessels 0,0570Fitting out services of ships and floating platforms and structures 0,0370Design and assembly of automated production plants 0,0370Repairing of ships, boats and floating structures 0,0350Frozen whole salt water fish 0,0250,012Other structures principally of sheet: other 0,0210,003Fresh or chilled fish fillets and other fish meat without bones 0,0190,013Fresh or chilled cuts, of beef and veal 0,0190,001Frozen fish fillets 0,3800,029 00,138Generating sets, wind-powered 00,029Medicaments containing corticosteroid hormones 00,028Medicaments containing insulin but not antibiotics, 0,0070,028Fresh or chilled pig meat 0,0010,024Weirs, sluices, lock-gates, and other maritime structures 0,0040,022Other food preparations n.e.c. 00,021Enzymes; prepared enzymes 0,0050,018Articles of iron or steel, n.e.s. 0,0020,017Other articles of plastics or other materials 0,0050,017Beer made from malt 0,0240,342 Thomas von Brasch: vonbrasch@gmail.com Shares of production, 2013 Source: Eurostat, PRODCOM database 2013. ISO country codes.

34. Thomas von Brasch: vonbrasch@gmail.com How can we increase productivity?

35. Thomas von Brasch: vonbrasch@gmail.com 1. Produce more electronics

36. Produce more electronics? Thomas von Brasch: vonbrasch@gmail.com Kilde: OECD STAN ISIC REV. 4, Industry d26 for USA. Development relative to overall GDP. USA.

37. Thomas von Brasch: vonbrasch@gmail.com 2. Fire people with a disability

38. Productivity – not at any price Policies directed at increasing productivity should be based on what is an overall gain for society, not only by the gain in productivity. Public policies to raise productivity in private businesses should be based on the existence of market failure, e.g., –Monopoly –Polution Thomas von Brasch: vonbrasch@gmail.com

39. Future productivity growth

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41. Employment Thomas von Brasch: vonbrasch@gmail.com

42. Implications for productivity: envelope calculation Public employment share is expected to rise from 30% to between 40 and 50% in 2060 Change in overall productivity growth = (change in employment share) x (difference in productivity growth) = (50%-30%) x (0,5%-2%) = -0,3 (percentage points) Is this a problem? Thomas von Brasch: vonbrasch@gmail.com

43. Other statistical facts about Norway

44. Gender gap index Economic Participation and opportunity –E.g., Female labour force participation, income etc. relative to male. Educational attainment –E.g., female literacy rate, enrolment rate etc. Health and survival –Female healthy life expectancy over male value Political empowerment –Females at ministerial level over male value Thomas von Brasch: vonbrasch@gmail.com World Economic Forum: http://www3.weforum.org/docs/GGGR14/GGGR_CompleteReport_2014.pdf

45. Gender gap index Thomas von Brasch: vonbrasch@gmail.com

46. Women at work Thomas von Brasch: vonbrasch@gmail.com

47. Women at work Thomas von Brasch: vonbrasch@gmail.com https://www.regjeringen.no/no/dokumenter/meld-st-46-20122013/id733259/?ch=2

48. Wise women Thomas von Brasch: vonbrasch@gmail.com

49. Inequality: Gini coefficient = A/(A+B) Thomas von Brasch: vonbrasch@gmail.com

50. Inequality (Gini coefficient) Thomas von Brasch: vonbrasch@gmail.com Source: https://en.wikipedia.org/wiki/Economic_inequalityhttps://en.wikipedia.org/wiki/Economic_inequality

51. Employment and labour force participation rates 2012 Thomas von Brasch: vonbrasch@gmail.com https://www.regjeringen.no/no/dokumenter/meld-st-46-20122013/id733259/?ch=2

52. Thomas von Brasch: vonbrasch@gmail.com

53. Current macroeconomic situation

54. Output gap Thomas von Brasch: vonbrasch@gmail.com Output Time Potential output Actual output

55. Output gap in Norway Thomas von Brasch: vonbrasch@gmail.com

56. Stabiliser 1: Government policy – «budgetary rule» Thomas von Brasch: vonbrasch@gmail.com

57. Stabiliser 2: The Central Bank of Norway Thomas von Brasch: vonbrasch@gmail.com

58. Stabiliser 2: The Central Bank of Norway Thomas von Brasch: vonbrasch@gmail.com

59. Why do we have so low interest rates? Thomas von Brasch: vonbrasch@gmail.com Savings Investments

60. Why do we have so low interest rates? Thomas von Brasch: vonbrasch@gmail.com Savings Investment slump

61. Why do we have so low interest rates? Thomas von Brasch: vonbrasch@gmail.com Savings glut Investment slump

62. Stabiliser 3: Wage negotiations Thomas von Brasch: vonbrasch@gmail.com

63. Stabiliser 4: Exchange rate Thomas von Brasch: vonbrasch@gmail.com http://www.economist.com/news/finance-and-economics/21674775-currency-pegs-are-still-fashion-some-are-creaking-pegs-under- pressure?frsc=dg%7Cd

64. Stabiliser 4: Exchange rate Thomas von Brasch: vonbrasch@gmail.com

65. Contributions to future GDP growth Thomas von Brasch: vonbrasch@gmail.com

66. Summary Norway –Wealthy –«Equal» in many respects –Highly educated –No productivity puzzle –Different sectoral composition sector compared with many other European countries 4 important short run stabilising mechanisms Thomas von Brasch: vonbrasch@gmail.com