Kingdom of the Netherlands—The Netherlands: Selected Issues

This Selected Issues paper examines diagnostic and policy options to enhance labor productivity in the Netherlands. Despite already boasting one of the highest labor productivity levels globally, the country faces significant challenges in boosting productivity growth. The analysis suggests that productivity can be improved through targeted reforms for both workers and firms. Enhancing education outcomes and vocational training, particularly in small and medium enterprises (SMEs), will help maximize the potential of the Dutch workforce. Given the lower productivity of self-employed individuals, efforts to reduce labor market duality should be sustained. As the population ages, maintaining high skills across generations and effectively integrating migrants into the labor market are essential. Additionally, addressing increased resource misallocation by promoting business dynamics and encouraging productivity-enhancing investments will be crucial for Dutch firms. Completing the EU single market and tackling factors that hinder investment activities are key priorities. Furthermore, fostering productivity spillovers both domestically and internationally, and encouraging SMEs to engage in more research and development activities, will significantly benefit productivity growth.