The Source of Economic Growth in OECD Countries: A Review Article

In early 2003, the OECD released a major report entitled The Sources of Growth in OECD Countries. In the seventh and final article, Martin Neil Baily from the Institute for International Economics, and former Chairman of the U.S. Council of Economic Advisers reviews the report. Baily notes that key findings include: the diversity in GDP per capita growth across OECD countries, largely reflecting differences in labour utilization; the importance for growth of exposure to international trade, sound macro policies and investment in physical and human capital; and the high returns to growth from business sector R&D activities, in contrast to a lack of any positive effect from government R&D. Baily observes that the report fails to discuss ways to improve employment growth, concluding that combining full employment with high productivity is the key challenge currently facing policymakers.