This document discusses inclusive growth and the role of budgetary governance. It notes slow growth, joblessness, and income inequality since the crisis as motivation. The OECD is taking a multidimensional approach to inclusive growth looking at more than just income, focusing on distributional impacts, and broadening policy surveillance. Budgeting can contribute by moving to an inclusive growth framework, evaluating multi-dimensional impacts of budgets, and increasing inclusiveness and engagement in the policy-making process.

1. Inclusive Growth:
the role of budgetary governance
Luiz de Mello
Deputy Director – Public Governance
& Territorial Development
Senior Budget Officials, Rome – 12 June 2015

2. • Motivation and context
• What is the OECD doing in this area?
• How can budgeting contribute?

3. Motivation and context

4. Motivation
• Legacies from the crisis and long-term trends
– Slow growth, persistent joblessness, widening income
inequality, low trust in institutions
• Growing body of OECD work in this area
– Well-being, income inequality, structural reforms
– NAEC initiative: interdependencies and complexity, policy
trade-offs and synergies, new tools and methods
• Related GOV strands of work
– Regional well-being, regulation, integrity, etc.
– Agenda for the Helsinki Ministerial meeting of 27-28
October 2015, and work priorities for beyond 2015

5. The context: slow growth and persistent
joblessness
Note: OECD Economic Outlook database.
Long-term unemployment
(jobless for over 1 year, % of total unemployed)
Real GDP
(2007:3=100)
0
10
20
30
40
50
60
0
10
20
30
40
50
60
United
States
OECD Japan Euro area
Q4 2007 Q4 2014
80
90
100
110
120
130
140
2007Q3
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
2012Q1
2012Q3
2013Q1
2013Q3
2014Q1
2014Q3
2015Q1
2015Q3
EUR JPN USA WLD

6. The context: widening income disparities
Note: OECD Income Distribution database.
Gini coefficients of income inequality
(mid-1980s and 2013, or latest available year)
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
1985 2013 or latest
Increase Little change Decrease

7. What has the OECD been doing in
this area?

8. Inclusive Growth: A three-pronged approach
• Multidimensionality: grounded in growth but looks at
more than income (employment, education, health)
 Which growth?
• Distribution-focused: not only “averages”, but also
incidence and impact
 Whose growth?
• Policy-relevant: broaden policy surveillance to non-
income dimensions
 What drivers?

9. An illustration of different growth path
Note: OECD calculations based on OECD National Accounts, Health
and Income Distribution databases.
Median households
(Average yearly change in %, 1995-2007)
• Usual metrics
• GDP per capita vs
“multidimensional
living standards”
• An illustration for
US and EU
• Faster income growth
in the US, but slower
progress in health and
widening income
distribution

10. OECD analysis of growth, wellbeing, equality

11. How can budgeting contribute?

12. Response required across all of Public Governance
• Regional development – regional wellbeing
indicators, impacts on policy design
• Open government – transparency, participation, data
• Centre of government – vision, goals, coordination
• Regulation – broadening scope, nature of RIA
• Budgeting –
what needs to change?
what should we be doing differently?

13. (a) From a “Pro-growth” to an “Inclusive growth”
fiscal framework
• Growth-friendly fiscal rules, objectives?
• Highlighting the “growth dividend” of inclusiveness?
– E.g. systematic underinvestment by bottom 40% of
individuals in their education?
• Protecting and prioritising capital investment?
• Social and environmental dimensions of
infrastructural investment?

14. (b) Evaluating multi-dimensional impacts of
budgetary choices
• From income impact assessments to a multi-
dimensional model?
• Systematic reform of evaluation (along lines of RIA)?
• Implications for government-wide strategic planning?
• Use of Key National Indicators as “fixed stars” for
national policy-making and international
becnhmarking

15. (c) Inclusiveness and engagement in policy-making
• Can be parliaments be “activated” as participants in
policy-making across the policy cycle?
• “windows of engagement” for citizens in budget-making?
• Promoting a realistic debate on relative priorities?
• Social media, crowdsourcing, “deliberative dialogue” –
opportunities and risks from new tools of engagement?