OECD Economic Surveys : Switzerland - Volume 2007 Supplement 1.

166 Pages·2007·3.076 MB·English

by  OECD

OECD Economic Surveys V
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Australia, July 2006 Baltic States, February 2000 p
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Belgium, March 2007 Bulgaria, April 1999
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Canada, June 2006 Chile, November 2007 n
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Denmark, May 2006 India, October 2007 . 1
Euro area, January 2007 Romania, October 2002
European Union, September 2007 Russian Federation, November 2006
Finland, May 2006 Slovenia, May 1997
France, June 2007 Ukraine, September 2007
Germany, May 2006 Federal Republic of Yugoslavia, January 2003
Greece, May 2007
Hungary, May 2007
Iceland, August 2006
Ireland, March 2006
Italy, June 2007
Japan, July 2006
Korea, June 2007
Luxembourg, July 2006
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Mexico, September 2007
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Netherlands, December 2005 C
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New Zealand, April 2007 E
Norway, January 2007 c
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Spain, January 2007 u
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Turkey, October 2006 S
United Kingdom, September 2007 W
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ISSN 0376-6438
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2007 SUBSCRIPTION o
Supplement No. 1 (18 ISSUES) ve
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ISBN 978-92-64-03998-8 -:HSTCQE=UX^^]]: be Volume 2007/19 – November 2007
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OECD
Economic Surveys
Switzerland
2007
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ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
The OECD is a unique forum where the governments of 30 democracies work together to
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TABLE OF CONTENTS
Table of contents
Executive summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Assessment and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Chapter 1. Macroeconomic performance and main challenges. . . . . . . . . . . . . . . . . . . 21
Recent economic developments paint a picture of continued strength . . . . . . . . . . 23
Macroeconomic policy must aim to head off a rise in inflation. . . . . . . . . . . . . . . . . 28
Medium-term challenges in fiscal policy are still substantial . . . . . . . . . . . . . . . . . . 32
Productivity in sectors lacking in competition is holding back growth performance. . 34
Immigration inflows have sustained labour supply. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Annex 1.A1. Progress in structural reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Chapter 2. The significance of Switzerland’s enormous current-account surplus . . . 49
Recent developments in Switzerland’s balance of payments. . . . . . . . . . . . . . . . . . . 50
What could be causing this huge surplus?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
The implications for public policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Chapter 3. Making fiscal policy more supportive ofeconomic growth . . . . . . . . . . . . . 65
The fiscal framework should steer public finances onto a sustainable path. . . . . . 66
Social spending should be better contained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
The tax system should be modified to safeguard competitiveness and reduce
distortions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Chapter 4. Deficiencies in the regulation of goods and services markets remain . . . 97
Recent reform in competition law and competition law enforcement needs
tobe followed up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Technical barriers to trade can still be lowered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
The scope to intensify competition in network industries is still large . . . . . . . . . . 99
Public procurement markets continue to be geographically fragmented. . . . . . . . . 110
Agricultural policy generates high costs for the economy . . . . . . . . . . . . . . . . . . . . . 110
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
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TABLE OF CONTENTS
Chapter 5. The contribution of immigration toprosperity can be raised further . . . . 117
Main characteristics of the trend in migration stocks and flows. . . . . . . . . . . . . . . . 118
Migration policy: in search of balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Economic aspects of migration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Annex 5.A1. The various types of immigration permits in Switzerland. . . . . . . . . . . 161
Boxes
1.1. The OECD's short-term projections for Switzerland . . . . . . . . . . . . . . . . . . . . . . . 25
1.2. Measurement issues in the Swiss current account surplus. . . . . . . . . . . . . . . . . 27
3.1. Policy recommendations for making fiscal policy more supportive
ofeconomic growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
4.1. Government ownership in network industries . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
4.2. The Swiss electricity market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
4.3. Vertical separation of electricity generation and transmission . . . . . . . . . . . . . . . . . 103
4.4. Recommendations to make regulation of product markets more conducive
to competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
5.1. The Agreement on the Free Movement of Persons with the European Union. . 126
5.2. Direct impact of immigration on the growth of activity and per capita income. . . 132
5.3. The compulsory schooling harmonisation project at cantonal level . . . . . . . . . 149
5.4. Recommendations regarding immigration policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Tables
1.1. Gross domestic product and spending aggregates. . . . . . . . . . . . . . . . . . . . . . . . . 26
1.2. Government accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.3. The financial plan of the Confederation for2008-10. . . . . . . . . . . . . . . . . . . . . . . 34
1.4. Decomposition of labour utilisation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.1. Switzerland’s balance of payments in2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.1. Health expenditure by sources of funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
3.2. Distribution of expenditures on health care by type. . . . . . . . . . . . . . . . . . . . . . . 73
3.3. Resources available in the health-delivery system . . . . . . . . . . . . . . . . . . . . . . . . 74
3.4. VAT/GST rates in selected OECD countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
3.5. Overall statutory tax rates on dividend income. . . . . . . . . . . . . . . . . . . . . . . . . . . 88
4.1. Agricultural support estimations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
5.1. Possible long-term population trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
5.2. GDP and per capita growth decomposition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
5.3. Foreign employment by sector of activity according to length ofresidence
in Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
5.4. Internal migration, by nationality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
5.5. Basic skills of 15year-olds according to their cultural background . . . . . . . . . . 145
5.6. Likelihood of finding an apprenticeship by national origin . . . . . . . . . . . . . . . . . 148
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TABLE OF CONTENTS
Figures
1.1. Decomposition of GDP per capita in PPP terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.2. Economic growth in Switzerland and the euro area . . . . . . . . . . . . . . . . . . . . . . . 23
1.3. The contribution of financial-sector value-added to economic growth. . . . . . . 24
1.4. Labour market indicators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
1.5. The current account and its main components. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.6. Wage and price inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1.7. Indicators of monetary policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
1.8. Public finance indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
1.9. Social spending in selected countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.10. Total public expenditure growth by category. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
1.11. Labour productivity growth and level across countries . . . . . . . . . . . . . . . . . . . . 35
1.12. The price level remains high. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
1.13. Participation trends in the labour market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
1.14. Net migration flows over time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
1.15. Educational level of the foreign working population. . . . . . . . . . . . . . . . . . . . . . . 40
1.16. Unemployment and foreign population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
1.17. Unemployment rates and duration of incomplete unemployment spells . . . . . . . 41
2.1. Evolution of the current account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
2.2. Trend in savings, investment and net current account . . . . . . . . . . . . . . . . . . . . 52
2.3. Split of the savings surplus in the Swiss economy . . . . . . . . . . . . . . . . . . . . . . . . 53
2.4. International investment positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
2.5. Real long-term interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
2.6. Volatility in real GDP growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
2.7. The yen and Swiss franc have moved together in the past five years . . . . . . . . 59
3.1. Federal tax revenues and financial markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
3.2. Health expenditure in OECD countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
3.3. Inflows, outflows and stocks of new beneficiaries, by type of disability . . . . . . 81
3.4. Tax revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
4.1. ADSL speed and prices in international comparison. . . . . . . . . . . . . . . . . . . . . . . 105
4.2. Mobile telephone prices in international comparison. . . . . . . . . . . . . . . . . . . . . . 106
4.3. Relative labour productivity level in agriculture in selected countries. . . . . . . . 111
5.1. Stocks of foreign population in selected OECD countries. . . . . . . . . . . . . . . . . . . 118
5.2. Flows of foreign population in selected OECD countries . . . . . . . . . . . . . . . . . . . 119
5.3. Foreign population development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
5.4. Acquisition of nationality for selected OECD countries . . . . . . . . . . . . . . . . . . . . 120
5.5. Impact of immigration on population growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
5.6. Foreign population trends by nationality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
5.7. Resident population by type of residence permit . . . . . . . . . . . . . . . . . . . . . . . . . 123
5.8. Working population by nationality and educational level . . . . . . . . . . . . . . . . . . 124
5.9. Inflows of asylum seekers into OECD countries. . . . . . . . . . . . . . . . . . . . . . . . . . . 127
5.10. Quotas used by length of residency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
5.11. Immigration by category of entry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
5.12. Immigration and housing market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
5.13. Employment, unemployment and participation rates for Swiss andforeigners 137
5.14. Jobs held by foreigners by sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
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TABLE OF CONTENTS
5.15. Unemployment rate among non-EU/non-English speaking immigrants
and among natives in OECD countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
5.16. Educational pathways of lower secondary cycle pupils according tonationality
and type of programme. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
5.17. Young persons who have left school early by nationality . . . . . . . . . . . . . . . . . . 145
5.18. Share of highly heterogeneous classes and share of pupils of foreign nationality
in compulsory schooling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Table of contents
This Survey is published on the responsibility of the Economic and Development
Review Committee of the OECD, which is charged with the examination of the
economic situation of member countries.
The economic situation and policies of Switzerland were reviewed by the Committee
on 17September2007. The draft report was then revised in the light of the
discussions and given final approval as the agreed report of the whole Committee on
4October2007.
The Secretariat’s draft report was prepared for the Committee by ClaudeGiorno,
AndrésFuentes and EduardoCamero under the supervision of PeterJarrett.
Research assistance was provided by FrancoiseCorreia.
The previous Survey of Switzerland was issued in January2006.
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6 OECD ECONOMIC SURVEYS: SWITZERLAND – ISBN 978-92-64-03998-8 – © OECD 2007
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BASIC STATISTICS OF SWITZERLAND
THE LAND
Area (1000sq. km) 41.3 Major cities (1000inhabitants, 31/12/2006)
Cultivated land, grassland and pastures 15.3 Zurich 347.5
(1000sq. km) Basel 163.9
Forests (1000sq. km) 12.7 Geneva 178.7
Bern 122.2
THE PEOPLE
Population (thousands, 31/12/2006) 7509 Civilian employment (thousands, 2006) 4291
Number of inhabitants per sq. km (2006) 182 Primary (%) 3.7
Net natural increase (thousands, 2006) 13.1 Secondary (%) 23.7
Number of foreign workers (thousands, 2006) 1094 Tertiary (%) 72.5
PRODUCTION
Gross Domestic Product, current prices (2006) Gross fixed investment, current prices (2006)
CHFbillion 486.2 % of GDP 21.3
GDP per head (USD) 51687 Per head (USD) 11030
THE GOVERNMENT
Public consumption (% of GDP, 2006) 11.1 National State
General government (% of GDP, 2005, estimates) Composition of Parliament Council Council
Expenditure 33.4 Socialists 52 9
Revenues 32.3 Central Democratic Union 55 8
Gross debt 48.6 Radical Democrats 36 14
Christian Democrats 28 15
Other 29 0
Last elections: October2003
Next elections: 21October2007
FOREIGN TRADE
Exports of goods and services (% of GDP, 2006) 52.5 Imports of goods and services (% of GDP, 2006) 44.9
Commodity exports (billionCHF, 2006) 177.5 Commodity imports (billionCHF, 2006) 165.4
Distribution by area (% of total, 2006) Distribution by area (% of total, 2006)
To industrialised countries 78.8 To industrialised countries 89.2
To 27EU countries 62.1 To 27EU countries 81.6
To OPEC 3.1 To OPEC 2.5
Distribution by categories (% of total, 2006) Distribution by categories (% of total, 2006) 0
Raw materials and semi-finished goods 22.9 Raw materials and semi-finished goods 26.4
Capital goods 29.9 Capital goods 25.9
Consumer goods 44.6 Consumer goods 39.3
Energy 2.6 Energy 8.5
THE CURRENCY
Monetary unit: Swiss franc Currency unit per USD, average of daily
figures
Year2006 1.2532
September2007 1.1851
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EXECUTIVE SUMMARY
Executive summary
A
vigorous economic expansion has allowed Switzerland to emerge from a decade of weak
economic growth. However, some of the factors fuelling the current upswing are likely to prove
temporary, as manufacturing has benefited from currency depreciation and financial
intermediation from a rebound in global and domestic capital-market activity, which could be
coming to an end. The recent large inflow of immigrants has the potential to make a longer-lasting
positive contribution to aggregate supply. But, held back by weak competition in sectors not
exposed to international trade, the productivity level is still moderate, and prices are high in
comparison with other high-income countries, lowering living standards.
The government has taken a number of steps to remove barriers to product-market
competition. Some have just come into force or still await parliamentary approval. Nonetheless,
the pace of reform remains slower than in other OECD countries, entailing the risk that relative
living standards may slip further in the medium term. While the government has stepped up
efforts to control overall outlays, the trend rise in mandatory social spending is unbroken, limiting
the extent to which public finances could serve to increase potential growth. The labour market has
been fully opened to the residents of most EU countries and will remain attractive to other
migrants, so the authorities will have to continue to try to make the most of immigrants’ potential
contribution to domestic prosperity. Therefore, to turn the recent cyclical upswing into a lasting
improvement in growth outcomes, the policy challenges are as follows:
● Public finances should focus on medium- and long-term sustainability so as to
support potential growth. The general government has moved into a surplus position.
However, welfare reform efforts need to halt the trend increase in mandatory social spending
and preserve high labour-force participation. To this end, incentives for disability beneficiaries
to return to work need to be improved. Mixed hospital funding responsibilities are problematic.
Pension system design must confront demographic change. Tax reform could help to stimulate
economic activity by lowering compliance costs and reducing distortions.
● Competition in product markets should be strengthened to raise productivity and
lower prices. Measures taken to eliminate barriers to competition in product-market regulation
need to be followed up if their benefits in terms of improved performance are to be reaped.
Conditions are not yet in place to guarantee that new entrants in the network industries do not
suffer discrimination by incumbents. Enforcement of general and sector-specific competition
legislation would be improved by providing regulators with more resources and powers and by
ensuring their independence. In agriculture, remaining production-related support and barriers
to structural change in land law need to be removed.
● Immigrants’ labour-market performance and human-capital acquisition should be
nurtured. While most immigrants are well integrated in the labour market, discrepancies in
outcomes between immigrants and natives are marked, and migrants’ children under-perform
in education. The acceptance of immigrants’ foreign credentials needs to be facilitated. Stronger
8 OECD ECONOMIC SURVEYS: SWITZERLAND – ISBN 978-92-64-03998-8 – © OECD 2007