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John Dryden, OECD Conference on Using Knowledge for Development in EU Accession Countries World Bank, Paris, 20 February

John Dryden, OECD Conference on Using Knowledge for Development in EU Accession Countries World Bank, Paris, 20 February 2002 . The Knowledge Economy -- the OECD Approach. Outline. The scope of OECD work on the Knowledge Based Economy Measurement – the OECD STI Scoreboard “Towards a KBE”

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John Dryden, OECD Conference on Using Knowledge for Development in EU Accession Countries World Bank, Paris, 20 February

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  1. John Dryden, OECDConference on Using Knowledge for Development in EU Accession Countries World Bank, Paris, 20 February 2002 The Knowledge Economy -- the OECD Approach

  2. Outline • The scope of OECD work on the Knowledge Based Economy • Measurement – the OECD STI Scoreboard “Towards a KBE” • Analysis -- the KBE and the OECD Growth Project • Policies -- a comprehensive growth strategy for the KBE

  3. The scope of OECD work on the Knowledge Based Economy A Knowledge Based Economy is one in which knowledge is created, acquired, transmitted and used effectively by all economic actors

  4. The scope of OECD work on the Knowledge Based Economy • Seize the benefits of ICTs • Harness the potential of innovation and technology diffusion • Enhance human capital and realise its potential • Foster firm creation and entrepreneurship • Get the fundamentals right

  5. Outline • The scope of OECD work on the Knowledge Based Economy • Measurement – the OECD STI Scoreboard “Towards a KBE” • Analysis -- the KBE and the OECD Growth Project • Policies -- a comprehensive growth strategy for the KBE

  6. OECD Science, Technology and Industry Scoreboard 2001 Towards a knowledge-based economy

  7. 2001 edition: what’s new? • Over 160 indicators, 60% new • Measuring the information economy • Improved classification of technology and knowledge intensive industries • The Web Scoreboard

  8. Information economy Global integration Economic of economic activity structure and productivity an integrated view Creation and diffusion of knowledge

  9. Investment in knowledge as a percentage of GDP, 1998 The “KNOWLEDGE INTENSITY” is increasing

  10. More R&D spending towards basic research ... Basic research as a percentage of GDP by sector of performance

  11. Building up the ICT INFRASTRUCTURE Access paths per 100 inhabitants, 1999 Broadband penetration rates, January 2001

  12. The increasing contribution of ICT to the economy Share of ICT value added in business sector value added, 1999

  13. A growing share of knowledge-intensive sectors Knowledge-intensive sectors as a share of total gross value added, 1998, Top 10 countries

  14. Internet home access among households by income level, 2000 Bridging access to the Internet

  15. The contribution of ICT equipment and software to output growth Business sector, 2000

  16. Outline • The scope of OECD work on the Knowledge Based Economy • Measurement – the OECD STI Scoreboard “Towards a KBE” • Analysis -- the KBE and the OECD Growth Project • Policies -- a comprehensive growth strategy for the KBE

  17. THE OECD GROWTH PROJECT: A New Economy? MINISTERIAL MANDATE 1999 • What are the causes of growth disparities in the OECD? • What are the factors and policies that can strengthen growth performance? • What is the role of factors such as innovation, knowledge, human and social capital, service industries and start-up firms - i.e. what is new in economic growth?

  18. Structure of the Project • 2-Year Horizontal / multidisciplinary project • Initial findings reported to Ministers in June 2000, Final report May 2001 • Follow up -- ICTs, knowledge-driven growth and “benchmarking” policies

  19. Growth of GDP per capita in the 1990s

  20. GDP per capita was supported by increased labour input

  21. What drives these patterns? • Macro-economic policy continues to matter. • Contribution from Human Capital and Labour market reforms • The role of innovation and the impact of information and communications technology.

  22. ICT as a Source and Driver of Innovation ICT exemplifies the changes in the relationship between S&T and economic performance: • driving patenting • strong BERD • close links to university and consortiums of businesses

  23. ICT producing and using sectors contribution to labour productivity growth

  24. NASDAQ and US Secure Servers 3000 90000 80000 Nasdaq Telecom. 2500 Index 70000 2000 60000 Nasdaq Computers 50000 Secure Servers Nasdaq 1500 Index 40000 1000 30000 Number of Secure 20000 Servers in the 500 United States 10000 0 0 Jun-99 Oct-99 Jun-00 Oct-00 Feb-99 Feb-00 Feb-01 Apr-99 Dec-99 Apr-00 Dec-00 Apr-01 Aug-99 Aug-00 Source: OECD based on Netcraft (www.netcraft.com) and Nasdaq

  25. The Changing Role of Human Capital • The quality of labour is improving • Knowledge workers are more important • Knowledge workers are more mobile

  26. The quality of labour is improving across the OECD

  27. ... and knowledge workers are more important Note: Data cover US and EU countries.

  28. % 30 25 20 15 10 5 0 Italy Spain Austria France Belgium Canada Australia Germany Japan Switzerland Other OECD United Kingdom UNITED STATES KNOWLEDGE is more “mobile” Distribution of foreign students in OECD by host country, 1999

  29. Outline • The scope of OECD work on the Knowledge Based Economy • Measurement – the OECD STI Scoreboard “Towards a KBE” • Analysis -- the KBE and the OECD Growth Project • Policies -- a comprehensive growth strategy for the KBE

  30. 1. Get the fundamentals right. • Macroeconomic policy matters: sound public finances and low inflation are needed to foster investment. • Openness to trade, investment, technology, ideas and people is fundamental to innovation and growth. • Countries with improved growth performance have been strong reformers of labour and product markets. • Reform of markets can instil greater competition, more flexibility, and implies that countries are ready when new opportunities for growth emerge. • Good fundamentals can help address the distributive consequences of change.

  31. 2. Foster innovation for future growth • Ensure sufficient funding for the creation of basic knowledge - as the seed for future innovation. ICT and biotechnology are not the only answers. • Make government support for innovation more effective - competitive mechanisms, public-private partnerships and regular evaluation can help. • Increase interaction between firms, universities and research institutes. Barriers to interaction, such as constraints on labour mobility, are still important. • Address new issues related to intellectual property rights, e.g. demands for IPR on basic knowledge.

  32. 3. Facilitate the diffusion of ICT • Competition forces firms to enhance efficiency,lowers the costs of new technologies and enhances diffusion. • Still low competition in many OECD countries, trade and investment barriers related to ICT, and slow development of competition in telecommunications markets. • Flexible regulatory frameworks are needed to increase confidence in the use of ICT, and address concerns on privacy, security, reliability. • Electronic government can increase government efficiency, helps to strengthen network effects and can build confidence.

  33. 4. Invest in human capital • Invest in early education and child care: this is often more cost-effective than later interventions to remedy drop-outs. • Raise school completion and improve its quality. In many countries, this implies addressing teacher shortages. • Improve the school-work transition and strengthen the links between higher education and the labour market. • Provide wider training opportunities for adults - people will need to acquire new skills over their working life. • Reduce obstacles to workplace changes and give workers a greater voice in such changes.

  34. 5. Improve conditions for entrepreneurs • Reform regulations that slow down the development of venture capital markets and secondary markets to enhance the supply of finance to innovative projects. • Remove or reform barriers, such as red tape, that hinder the creation of new firms, or the exit of unprofitable businesses - bankruptcy laws in many OECD countries do not allow entrepreneurs a second chance, for example. • Make government programmes, e.g. one-stop shops for administrative formalities, more effective. • Encourage a more entrepreneurial spirit in society - education is often insufficiently geared towards entrepreneurship.

  35. Concluding remarks • There are “new” factors in knowledge-driven economic growth, but old economic laws still work. • Governments do have a role in innovation: rapid innovation and strong growth performance was partly the result of effective policies. • Lagging countries have often not yet implemented the reforms needed for stronger knowledge-driven growth. • Improving growth performance will take time. • It is uncertain how important ICT will be: the trick is to pursue broad-based knowledge based policies and remain open to innovation and new sources of growth. • Governments will need to manage adjustment to keep the costs of change low.

  36. John Dryden John.dryden@oecd.org www.oecd.org

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