Particularly worrisome is the further increase of inactivity of women as the region faces shrinking working age population, due to the two factors: first, adverse demographics, and second, immigration. We all well know that the labor force is one of the key determinants of economic growth. There are empirical studies that show that higher inclusion of women can bring a number of benefits. And not only for women, but for the whole society. Higher inclusion of women is associated with 10% higher GDP growth in advanced economies and 30% in developing economies. Focusing more closely on the Western Balkans, a World Bank study estimates that 2/3  BIS central bankers' speeches  countries in the region each year lose on average 18% of their total GDP, due to the gender gaps in the labor market. And about two thirds of the cost of lost GDP or income in the society can be explained by the lower participation of women. Higher growth can stem not only from the higher quantity of labor force that we need in this new environment, but also, and even more importantly, from the new quality that it can bring on board from different skills and psychological virtues that women bring in, such as: higher risk aversion, thoroughness, pragmatism, empathy. Further, more diversified institutional environment tend to lead to more optimal and effective decision making. For example, Credit Suisse analysis finds that Fortune 500 companies with female representation perform better than those without.
History doesn’t seem to offer much of a guide, though we’ve seen other periods of sustained productivity booms. We did not anticipate this acceleration, which itself suggests we need to be somewhat tentative in forecasting its future. Dale Jorgenson, Mun Ho, and Kevin Stiroh have concluded in some recent research that there’s a reasonable prospect that structural productivity growth will average just over 2.5 percent a year for the next decade. And they think the probability of growth exceeding that pretty favorable forecast is higher than the odds we’ll be disappointed. In support of that view, they make essentially two points. First, they do not see evidence of deceleration in the pace of advancement in technological innovation; nor do they see signs of diminishing marginal returns to IT investment or evidence that we are coming close to fully exploiting the potential of past innovations to improve productivity. And second, they argue that the improved competitive environment - in all its dimensions - is likely to continue to be a spur to further innovation, to further investment in technology and further adoption of technology. These are reasonably compelling arguments. Their forecast is close to that of the Council of Economic Advisers, the Congressional Budget Office and the consensus of private forecasters. They may prove to be right. But the overall environment for investment and innovation could be materially affected by the disposition of our fiscal and external imbalances and our exceptionally low net national savings rate. A few key points about the dimensions of these imbalances.