Richard Herd

Bio: Richard Herd is an academic researcher from Organisation for Economic Co-operation and Development. The author has contributed to research in topics: Private sector & Product market. The author has an hindex of 18, co-authored 40 publications receiving 852 citations.

Pension liabilities in the seven major economies

Abstract: This paper forms part of on-going OECD work on the economic assessment of public pension systems in view of the process of the ageing of populations. It provides indicative estimates of the likely size of public pension liabilities in the main seven economies based on simplifying assumptions, and analyses various methods of financing these liabilities. The methodology developed here is based on the so-called generational accounts approach. Such accounts indicate in present-value terms the lifetime financial burden government programmes impose on present and future generations. Up to now, the methodology has been used to estimate public pension liabilities in France and Belgium, in the framework of the 1993 OECD Economic Surveys for those countries ...

Has a private sector emerged in china 's industry ? evidence from a quarter of a million chinese firms

Abstract: This paper assesses the progress of China's transition towards a market economy by examining the structure of ownership, productivity, and profitability, as well as the concentration of production across firms, industries, and regions. It does this by analyzing a database of firm microdata of the quarter of a million industrial companies in operation during the 1998–2003 period. Results show that the private sector now accounts for more than half of industrial output, compared with barely more than a quarter of it in 1998, and operates much more efficiently than the public sector. Higher productivity has fed through to improved profitability, motivating greater regional specialization of production. These changes are consistent with what would be expected in a market-based economy and suggest that reforms are making rapid progress.

Providing Greater Old-Age Security in China

Abstract: China’s population is set to age fast, owing to low fertility and rising life expectancy. With ongoing migration of the younger cohorts to urban areas the increase in the old-age dependency ratio will be even more pronounced in rural than in urban areas. Very different pension arrangements exist across the country, with diverse and segmented systems in urban areas, belated retirement and low replacement ratios in rural areas, and special rules governing public sector pensions. Labour mobility is impeded by some of features of the current pension system, not least limited benefit portability. Various reforms have been initiated or proposed over the past decade. Some add to the existing fragmentation, while others, notably those providing for greater geographical pooling, have only partly been implemented. Also, under current rules, effective replacement rates are fairly low and projected to decline further, both for rural and urban residents, which may be difficult to sustain with the elderly living less and less with their descendants. Furthermore, as the countryside ages, much of the additional burden will be shouldered by local governments with insufficient resources. These challenges can be addressed by gradually consolidating the various regimes, raising retirement ages and shifting more of the cost of rural pensions to the central government. Even if different schemes for different categories of workers were to persist, each should be unified over time, first provincially and then nationally, phasing out the urban-rural distinction.

Improving China's Health Care System

Abstract: Overall, health outcomes in China have improved tremendously over the past three decades, especially thanks to the reduction in some traditional infectious diseases. However, death rates from chronic diseases have been on the rise, not least owing to changes in life styles and deteriorating environmental conditions. Supply of health care is overwhelmingly provided publicly and hospitals have been absorbing a growing share of the resources. The number of doctors has increased fast but the level of qualification of incumbent doctors is often modest. Demand for care has risen rapidly, in line with incomes, and the relative price of care soared through the early 2000s. Hospital budgets and their doctors’ pay are partly based on the pharmaceuticals they prescribe and sell, whose prices are regulated and involve considerable cross-subsidisation. Faced with these problems, the government has launched a number of reforms. New insurance schemes have been rolled out both in rural and urban areas. As a result, coverage and use of medical facilities has increased a lot, except for migrants. In practice, however, catastrophic but also chronic illnesses continue to push people into poverty, especially in the poorer regions, given limited risk pooling at the national level. A new set of reforms was announced in 2009, aiming at universal, safe, affordable and effective basic health care by 2020. They involve investment in medical infrastructure, generalising coverage, more focus on prevention, a new essential drugs system and far-reaching reorganisation, including hospital reform. It will be important to make sure that primary care plays a greater role and that hospitals are managed more efficiently with less of a hierarchical structure. Progress will also require changes in the relative prices of treatments and higher doctors’ wages and tobacco prices.

Growth Prospects in China and India Compared

Abstract: This paper compares the growth prospects of China and India through a growth accounting analysis. Consistent time series for capital stock and employment are constructed using available survey data, and recent revisions to the national accounts for both countries are incorporated. The results allow for a discussion of the sources of growth in both countries, and a consideration of each country's rate of potential growth in light of the outlook for national savings, as demographic shifts occur in each country. JEL Classification: E20, O11, O47, P52 Keywords: Growth accounting; potential growth; capital measurement; demographics; China; India 1. Introduction China and India, as the fastest-growing of the 'BRIC' economies, occupy a special place in the imagination of observers in the OECD and elsewhere. Despite their low incomes, their sheer size combined with rapid growth means that they make a substantial and rapidly growing contribution to world output. The success or failure of each country to maintain their rapid growth into the future will have a tremendous impact not only on their own economies but on the world economy as a whole. Moreover, with populations of 1.3 and 1.1 billion, respectively, their rapid growth has the potential to raise living standards significantly for a third of the world's population, bringing hundreds of millions of people out of poverty and creating a middle class that rivals the EU and US in both size and income. In both countries, growth has accelerated in recent decades as trade liberalisation and market-oriented structural reforms have deepened. A glance at both countries' experience suggests a number of similarities in their reform paths. Despite very different political systems, both countries followed a reform path that markedly reduced the role of the government in economic activity and allowed a greater degree of openness to foreign trade. Reform started earlier in China than in India. Moreover, the opening to trade has proceeded at a much more rapid pace in China. Indeed, by the beginning of this decade, India was still one of the most highly protected economies in the world. On the other hand, India has always had a stronger private sector. Moreover, while the private sector was subject to considerable constraints on its investment planning, these largely ended in the early 1990s. However, in China the private sector has only emerged in past decade, as the result of a more favourable legal framework and the sale of government-owned assets. A careful description of these countries' sequence of reforms is elaborated elsewhere and we will not dwell on the policy details here.2 Nevertheless, it is important to note that China's transition started somewhat earlier and involved greater change than in India since it was, on the whole, further from being a market economy. However, both countries' reforms are still ongoing, so it would be premature to judge only past progress. Looking forward, despite immense reforms and impressive growth, there has been considerable scepticism about the sustainability of China's growth in particular. Especially over the past few years, when growth has broached double-digit rates, questions about the extent to which it can be sustained without creating inflationary pressures or incurring large batches of new non-performing loans are often heard in the press. For India, the situation is nearly reversed: many observers have thought that India can and should grow faster than the 6% average that it attained over the past ten years. Recent marked increases in investment suggest that the economy can indeed grow faster than this on a sustainable basis - at around 8½ per cent annually if the increase in investment is not just a cyclical phenomenon. Indeed, many political leaders have argued that India should be able to grow even faster over the medium-term. For China, we will argue that that current growth rates are not markedly different from potential growth rates and so that concerns about overheating are not warranted but that the case that growth will need to slow down over the medium term seems strong. …

Creative Accounting or Creative Destruction? Firm-level Productivity Growth in Chinese Manufacturing

Abstract: We present the first comprehensive set of firm-level total factor productivity (TFP) estimates for China's manufacturing sector that spans China's entry into the WTO. For our preferred estimate, which adjusts for a number of potential sources of measurement error and bias, the weighted average annual productivity growth for incumbents is 2.85% for a gross output production function and 7.96% for a value added production function over the period 1998–2007. This is among the highest compared to other countries. Productivity growth at the industry level is even higher, reflecting the dynamic force of creative destruction. Over the entire period, net entry accounts for over two thirds of total TFP growth. In contrast to earlier studies looking at total non-agriculture including services, we find that TFP growth dominates input accumulation as a source of output growth.

Capitalism with Chinese Characteristics: Entrepreneurship and the State

Abstract: Presents a story of two Chinas – an entrepreneurial rural China and a state-controlled urban China. In the 1980s, rural China gained the upper hand. In the 1990s, urban China triumphed. In the 1990s, the Chinese state reversed many of its rural experiments, with long-lasting damage to the economy and society. A weak financial sector, income disparity, rising illiteracy, productivity slowdowns, and reduced personal income growth are the product of the capitalism with Chinese characteristics of the 1990s and beyond. While GDP grew quickly in both decades, the welfare implications of growth differed substantially. The book uses the emerging Indian miracle to debunk the widespread notion that democracy is automatically anti-growth. As the country marked its 30th anniversary of reforms in 2008, China faces some of its toughest economic challenges and substantial vulnerabilities that require fundamental institutional reforms.

Averting the old age crisis

Abstract: Although the kind of reform that is needed will vary across countries, all countries should have a vision of where they are going in the long run. This vision should include separate mechanisms for redistribution and savings along with shared responsibility between the public and private sectors.

China's outward foreign direct investment: Location choice and firm ownership

Abstract: This article evaluates the international location decisions made by public listed Chinese firms during the period 2006–2008, using a Poisson count data regression model. Further, we categorize the firms into state-controlled and privately owned according to majority ownership. We find that the determinants of internationalization differ based on ownership. State-controlled firms are attracted to countries with large sources of natural resources and risky political environments. Private firms are more market seekers. Although all firms have strategic intent, the attraction is commercially viable technology rather than core research content. Our findings also show that existing theories can sufficiently explain the actions of private Chinese firms, but adjustments are needed to understand the behavior of state-controlled multinationals.

Measuring Cyclically-adjusted Budget Balances for OECD Countries

Abstract: Measuring cyclically-adjusted budget balances for OECD countries An important tool in the analysis of fiscal policy is the distinction between structural and cyclical components of the budget balance. This paper describes work undertaken to re-estimate and re-specify the elasticities underlying the Economics Department's calculations of cyclically-adjusted budget balances. Account is taken of tax reforms introduced since the previous updating exercise. A number of methodological innovations have been introduced to better account for the lags between taxes and activity and to ensure greater cross-country consistency in the estimates. The methodology underlying cyclical adjustment of expenditures has also been reviewed. Finally, the country coverage has been extended. The overall results are broadly consistent with the previous set of estimates. The sensitivity of government net lending to a 1 percentage point change in the output gap remains at around 0.5% of GDP for OECD economies on average.