In the public sector, there are no absolute requirements as to profitability and efficiency. Public enterprises do not go bankrupt, and in many cases the authorities cannot allow a public enterprise to discontinue operations. This is a demanding starting point for a shift to more locally determined wages. The possibility of granting local pay increases might, however, increase efficiency if there are binding nominal budget limits for these entities and clear production requirements. When a higher share of wages is determined at the local level and coordination is reduced, it will be even more important to promote flexibility in the labour market and the labour supply. Otherwise, an increasing number of workers may be excluded from working life and unemployment may rise on a permanent basis, while the foundation for production is weakened. Effective labour market programmes, supported by a sound system for education and infrastructure, can facilitate these adjustments. It is also important to assess working environment and labour market legislation with a view to fostering greater flexibility. Hiring costs may be reduced and flexibility enhanced through greater scope for temporary employment and labour contracting. The throughput in universities and colleges can be improved. The financial incentives and entitlement thresholds in our social security system are also of substantial importance to employment. Pensions  In Norway, the employment rate is among the highest in the OECD area. This reflects both high labour force participation and low unemployment.
Raddatz, C. (2003), “Liquidity Needs and Vulnerability to Financial Underdevelopment”, World Bank Policy Research Working Paper No. 3161, November. Rajan, R. (2004), “Why Are Structural Reforms So Difficult?” Finance and Development, June 2004, pp. 56-57. Reinhart, C. (2002), “Credit Ratings, Default and Financial Crises: Evidence from Emerging Markets”, World Bank Economic Review (forthcoming). Uribe, M. and V. Yue (2006), “Country spreads and emerging countries: Who drives whom?” Journal of International Economics, Vol. 69 pp. 6-36. World Bank (2005), Financial Sector Assessment: A Handbook, Washington D.C.  BIS Review 98/2008  11