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Economic Policy Reforms 2023
Going for Growth
Report
Economic Policy Reforms
Table of contents
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Norway
Product and labour markets functioning
Performance gaps
The insolvency regime tends to limit entrepreneurs’ ability to start new businesses following a failure, hampering effective resource reallocation. Time to discharge (i.e., the number of years before businesses are discharged from pre-bankruptcy indebtedness) is particularly long.
Despite a very low unemployment rate, almost 20% of the working-age population is outside the workforce, with some groups permanently detached from the labour market.
Recommendations
Boost business productivity through improvements in insolvency procedures, including lighter penalties for failed entrepreneurs.
Increase further spending on active labour market programmes upon a close monitoring of their outcomes and a focus on the population with a weak attachment to the labour force and training programmes that provide skills for the digital era.
Digital transition
Performance gaps
Digital connectivity is high, and most firms use ICT tools. Norway also fares well in terms of provision and uptake of digital government services. However, the lack of digital literacy for some groups hampers digital inclusion.
There is also scope for the education system to provide more skills for the digital era. Relatively few students graduate in ICT or pursue degrees in other sciences, technology, engineering, and mathematics (STEM) fields.
Business R&D is comparatively low, despite government support.
Recommendations
Introduce under the on-going digitalisation reform of the public sector programs aimed at improving digital literacy for some specific segments of the population, such as students and foreign women.
Provide additional funding to tertiary institutions for degree completions in disciplines that are important for the digital transformation.
Rebalance R&D support for SMEs towards direct support.
Inclusiveness, social protection, and ageing
Performance gaps
Income inequality is low, thanks to high employment among women and comparatively narrow gender wage gaps. However, labour force participation has been trending downward, due to early retirement.
Housing affordability remains an important issue for low-income households, especially in high-cost cities.
Recommendations
Limit pathways to early retirement, including by lowering sick-leave compensation and strengthening the treatment and rehabilitation requirements for receipt of disability benefits.
Raise investment in social rental housing and lift the income thresholds for eligibility to means-tested housing allowances for disadvantaged renters.
Climate transition
Performance gaps
Norway’s CO2 emissions are low, largely because of reliance on hydropower, but will need to be lowered further to achieve climate targets and move to a low-emission society by 2050. Carbon prices are due to increase and large-scale public-supported projects have been launched for carbon-capture and storage. However, gaps in the coverage of carbon taxation remain. Around 15% of total emissions, notably of methane and nitrous oxide from agriculture, are not priced or covered by the European Trading System.
Recommendations
Ensure implementation of the scheduled carbon-price increases under the new Climate Action Plan, while addressing gaps in the coverage of carbon taxation.
Continue providing support for technological solutions to facilitate the green transition, including carbon capture and storage projects.