Institutions to promote pro-productivity policies : logic and lessons

In order to promote productivity, and thus boost living standards in the long run, public policies need to focus on improving incentives, capabilities and flexibility within an economy. Such policies can be difficult for governments to devise and even more difficult for them to implement, given pressure group politics and fragmented administrative structures. A strong case exists for establishing public institutions that not only help governments identify the right policies, but that can also help them counter pressures against reform and inform the community about what is at stake. Necessary design features for such institutions include independent governance, transparent processes, solid research capacity, an economywide frame of reference and linkages to policy-making mechanisms within government. This paper provides a taxonomy of relevant institutional forms evaluated against these criteria. While the contribution of most organisations to ‘pro-productivity’ policies is incidental to their primary function, some have been expressly designed for this purpose. The extent of their contributions in practice has depended on the detail of their governance and operations, the tasks they have been assigned and how well governments have handled their reports. While there is no ‘one design fits all’ solution, there is considerable scope for most governments to strengthen institutional capability in this area. There is also potential for governments to learn from each other about the relative merits of different approaches, and for existing institutions themselves to build capability by drawing on the experience of others.