• unemployment benefit systems
• wage formation and industrial relations
• working-time flexibility and part-time work
• old-age pension systems and early retirement schemes
In each of the 44 individual policy categories, scores are assigned to reforms for every
OECD country and each of the two sub-periods 1994-98 and 1999-2004.74 They can be either
positive or negative, depending on whether the measure considered is in line or at odds with the
general thrust of OECD policy recommendations, as summed up in OECD (1999). The results are
then aggregated up to the seven broader policy areas above.
Whenever possible, the scoring method at the level of individual policy categories relies
on quantitative indicators, with the score of an individual policy measure depending on the
associated change in the relevant indicator. For example, changes in the OECD summary measure
of unemployment benefits are used to assign a score in the sub-category “benefit replacement
rates” of the broader area “unemployment benefit systems”. However, in certain cases, sources of
information are qualitative and their interpretation is more subjective (e.g. some aspects of
ALMPs). More broadly, some degree of uncertainty and judgement is inherent to any effort to
quantify individual reforms and, perhaps even more so, to aggregate such quantifications across
different policy instruments.75
Bearing these caveats in mind, illustrative indicators of reform intensity within each of the
seven policy areas can be calculated as the ratio of the actual to the maximum possible score,
where the latter is the score which would be obtained if maximum scores had been reached at the
level of all individual policy categories belonging to the relevant policy area. In addition, an
illustrative indicator of the overall intensity of reforms is calculated as the ratio of the total actual
score across the seven broad policy areas to the maximum possible score.76
Aggregate results for the entire period 1994-2004 are presented in Figure 5 (Panel A). On
average, the propensity to carry out labour market reforms has been greater in EU than in other
OECD countries, with six EU countries in the top six positions. Still, this progress has to be seen
in light of the greater scope and need for reform within the EU and, in particular, EMU. Indeed, a
noticeable feature of recent reform patterns within the euro area is their apparent lack of
relationship with initial conditions. Based on rankings across all OECD countries of initial
74.The scores assigned for the period 1999-2004 incorporate all legislated reforms up to mid-2004, even though some of these may not yet have
been fully implemented (e.g. some aspects of the Agenda 2010 in Germany, or various pension reforms that are phased in slowly).
75.Problems include: i) the degree to which a given reform is actually enforced may differ widely across countries; ii) no account is made for the
possibility of non-linear policy effects (i.e. the possibility that a given reform may have different impact on labour markets depending on the
initial policy stance in the area considered) and policy complementarities; and, iii) sets of weights have to be assigned to individual policy
categories in order to compute aggregate scores in broader policy fields.
76. Extensive testing shows that the ranking of countries in terms of overall reform intensity can be sensitive to the choice of weights
attached to the scores in individual policy categories (see Brandt, Burniaux and Duval, 2005).
177