LIME assessment framework LAF: an application to Lithuania

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LIME assessment framework (LAF) an application
to Lithuania

• Agne Geniusaite, Natalie Lubenets, and Declan
  Costello
• Directorate General for Economic and Financial
  Affairs
• European Commission
• Vilnius, 8 July 2008

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Structure of presentation

• Overview of the LAF
• LAF case study results for Lithuania

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Part I

• Overview of the LIME Assessment Framework (LAF)

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A political request

• Monitoring and assessing reforms is an important
  factor for the success of the Lisbon strategy.
  This calls for a clear and transparent approach
  based on suitable methods.
• ECOFIN Council, February 2007
• invites the Commission to continue working
  with Member States to further develop a clear and
  transparent methodology for the monitoring and
  evaluation of Lisbon reforms.
• European Council, March 2008

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The benefits of robust and transparent evaluation
frameworks

• credibility of political recommendations (CSRs
  and PTWs) depends on having robust and
  transparent underpinnings which is comparable
  across countries, policy areas and time
• reinforces the impact of political
  recommendations as evidence bolsters the
  position of reform promoters
• cross-country comparative analysis facilities
  peer review, sharing of best practices and mutual
  learning
• helps avoid criticism of important Lisbon
  stakeholders

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Overview of work on evaluation methodologies

• Tracking what is actually happening using
  standinsed reporting tables and databases on
  structural reforms under way in Member States
• Systematically identifying challenges and
  evaluating policy responses developing
  frameworks for identifying underperforming policy
  areas and their impact on growth
• Quantifying the impact of reforms on growth and
  jobs and the EU value-added modelling tools and
  econometric studies
• Close collaboration with internal (especially
  EMPL and ENTR) and external (EPC, EMCO, HLG)
  stakeholders

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The LIME Assessment Framework (LAF)
ANALYSIS
OUTPUT
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Underlying assumptions and approach

• Reference benchmark in is EU15 average,
• Level data refers to 2006 (when available), and
  change refers to 2000-06
• Continuous scoring system from -30 to 30, where
  score (Indicator-EU15average)/Standard
  deviation 10. Underperformance is defined as a
  score below -4
• Performance is assessed on results of the
  indicator-based assessment in level terms
  qualified with additional evidence on (i)
  indicators in terms of growth and (ii) additional
  country specific evidence

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Advantages and caveats

• Provides economically sound framework for
  identifying reform priorities which is
  transparent and comparale across policy areas and
  Member States
• But there are caveats and limitations
• usual caveats of growth acconting
• results in some policy areas are less robust
• some policy areas and dimensions of Lisbon
  strategy are missing

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The LIME Framework (LAF)
ANALYSIS
OUTPUT
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GDP components covered by LAF
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In which growth components does Lithuania
under-perform?
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The LIME (LAF) assessment framework
ANALYSIS
OUTPUT
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Policy areas covered by LAF
Product and capital market regulations
Labour market
Active Labour Market Policies
Competition policy framework
Making work pay interplay of tax and benefit
systems
Sector specific regulation
Labour taxation to stimulate labour demand
Regulatory barriers to entrepreneurship
Job protection and labour marker segmentation
Business dynamics Start-up conditions
Policies to increase hours worked
Financial markets and access to finance
Specific labour supply measures for women
Openness to trade and investment
Specific labour supply measures for older workers
Wage bargaining and wage setting policies
Immigration and integration policies
Labour market mismatch and labour mobility
Innovation and knowledge
Macroeconomy
Orientation and sustainability of public finances
RD and innovation policies
ICT
Macroeconomic background information
Education and life long learning
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Annex 1 a table for each individual policy area
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Main report overview of performance in policy
areas
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The Lisbon Assessment Framework (LAF)
ANALYSIS
OUTPUT
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(No Transcript)
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One analytical tool (note a rule) that can help
assess performance in a policy area

• to help Member States prepare NRPs for 2008-10
  cycle to be delivered in autumn 2008
• Could help encourage debate within country teams,
  and prepare Lisbon missions
• A tool for Commission and Council to analyse key
  challenges and reform commitments in NRPs

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But not a framework to assess policy response

• Elements in Commissions framework for identifying
  CSRs and PTWs
• performance in a policy area
• priority - contribution to growth jobs
• adequacy of policy response
• EPC has asked LIME to continue the work on policy
  responses, i.e. more transparency on how CSRs and
  PTWs are identified, and quantifying the impact
  of structural reforms on growth and jobs.

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Part II

• LAF case study results Lithuania

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In which growth components does Lithuania
under-perform?
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Main report overview of performance in policy
areas
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Performance in policy areas Labour market
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Performance in policy areas Labour market (Cont.)
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Main report overview of performance in policy
areas
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Performance in policy areas Labour market (Cont.)
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Performance in policy areas Product market
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Performance in policy areas Knowledge and
innovation
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Main report overview of performance in policy
areas
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Screening
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Screening (Cont.)
Underperforming policy areas
Related GDP components

• Active labour market policies

• Youth participation

Labour market

• Prime-age male participation

• Labour market mismatch and labour mobility

Product capital market

• Competition policy framework

• TFP

• Capital deepening

Innovation knowledge

• RD and innovation

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Screening (Cont.)

• Conclusions
• All underperforming policy areas are matched by
  an underperforming GDP component.
• There area matches related both to labour
  utilisation and labour productivity.
• A comprehensive policy package covering
  competition policy framework as well as RD and
  innovation could be instrumental in improving
  Lithuanias performance in capital deepening and
  TFP.
• Bottlenecks on labour market low youth and
  prime-age male participation could be related
  to underperformance in ALMP and labour market
  mismatch and labour mobility policies, especially
  for the vulnerable labour market groups such as
  the low-skilled.

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• Thank you very much for your attention

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Additional back-up slides
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Overall results

• Underperformance is identified in 35 of all
  cases, but largest number of negative scores in
  sector-specific regulation (15), ALMPs (13),
  specific labour supply measures for older workers
  (13), education and life long-learning (13)
• No distinct pattern in broad country groupings
  (euro area, EU12).
• Results of indicator based assessment uphelp in
  85 of cases. Some tendency to downgrade
  assessment. Large number of "qualifications in
  the education and LLL (11), immigration and
  integration policies (9), the orientation and
  sustainability of public finances (8), labour
  market mismatch and labour mobility (7),
  competition (7), and sector specific regulation
  (7).

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Comparing the results of LAF with the
recommendations in the Lisbon process

• Preliminary results of a comparison of policy
  areas indentified as underperformning in the LAF
  case studies with the policy areas where
  recommendations are addressed to Member States
  (key challenges, CSRs and PTWs)
• Not an assessment of the validity of CSRs and
  PTWs since these are issued on the basis of an
  inadequate policy response, but indication that
  recommendations in the Lisbon process are
  focussed on policy areas where Member States are
  lagging

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Main findings of the comparison

• The coverage of LAF is high. Main gaps are
  environment, plus dimensions such as quality of
  public spending and of work
• Between 70 and 80 of the recommendations is
  Lisbon are in policy areas identified as
  underperforming in LAF case studies.

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Useful to explore the differences between LAF
findings and Lisbon recommendations

• Largest difference arises in best-performing
  Member States (AT, IE, LU, DK) due to choice of
  benchmark
• Recommendations in the Lisbon strategy are spread
  unevenly across the Integrated Guidelines
  compared with more even distribution in LAF.
• Very high number of recommendations in Lisbon on
  ALMPs, business environment, RD and innovation,
  sustainability of public finances, whereas
  relatively few recommendations on financial
  markets, labour market mismatch and mobility,
  wage bargaining and immigration.