Labor and Product Market Reforms in Advanced Economies: Fiscal Costs, Gains, and Support

Banerji, Angana; Crispolti, Valerio; Dabla‐Norris, Era; Akcigit, Ufuk; Ebeke, Christian; Furceri, Davide; Komatsuzaki, Takuji; Poghosyan, Tigran

doi:10.5089/9781475583977.006

Cited by 36 publications

(20 citation statements)

References 9 publications

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“…Other studies have investigated the link between actual growth or productivity growth and structural reforms, focusing on the near-term benefits(Prati, Onorato, and Papageorgiou 2013), productivity effects (Dabla-Norris, Ho, and Kyobe 2015; Adler et al 2017) or a sample consisting of mostly advanced economies(Banerji et al 2017; IMF 2015 and 2016b).…”

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confidence: 99%

Subdued Potential Growth: Sources and Remedies

Çelik¹,

Köse

Ohnsorge

2020

SSRN Journal

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Global potential output growth has been flagging. At 2.5 percent in 2013-17, post-crisis potential growth is 0.5 percentage point below its longer-term average and 0.9 percentage point below its average a decade ago. Compared with a decade ago, potential growth has declined 0.8 percentage point in advanced economies and 1.1 percentage point in emerging market and developing economies. The slowdown mainly reflected weaker capital accumulation but is also evidence of decelerating productivity growth and demographic trends that dampen labor supply growth. Unless countered, these forces are expected to continue and to depress global potential growth further by 0.2 percentage point over the next decade. A menu of policy options is available to help reverse this trend, including comprehensive policy initiatives to lift physical and human capital and to encourage labor force participation by women and older workers.

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confidence: 99%

Subdued Potential Growth: Sources and Remedies

Çelik¹,

Köse

Ohnsorge

2020

SSRN Journal

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“…Structural reforms are motivated by multiple policy objectives. They can foster medium-term economic prospects and living standards by raising productivity and employment (Ostry, Prati, and Spilimbergo 2009, IMF World Economic Outlook 2016, 2019, improving debt sustainability (Banerji and others 2017), and enhancing the resilience of the economy to shocks (Aiyar and others 2019).…”

Section: Executive Summarymentioning

confidence: 99%

The Political Costs of Reforms

Ciminelli¹,

Furceri²,

Ge³

et al. 2019

Staff Discussion Notes

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Many countries are experiencing persistent, weak medium-term growth and limited fiscal space. Against this background, economic policy agendas—in both advanced and developing economies—are focusing increasingly on structural reforms. While there is broad agreement on the economic benefits of structural reforms, the political-economy of reform is less settled. This is because reforms may generate gains only in the longer term while distributional effects may be sizable in the short run, and because governments may lack political capital to confront vocal interest groups. In these circumstances, politicians may hold back on reforms, fearing they will be penalized at the ballot box. The aim of this Staff Discussion Note is to examine whether the fear of a political cost associated with structural reforms is justified by the available evidence, and whether there are lessons from the data about how reform strategies might be designed to mitigate potential political costs. It provides a major addition to recent IMF analysis examining the output and employment effect of reforms

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“…As noted by the President of the European Central Bank, Mario Draghi, "during the crisis, because of powerful vested interests, labour market reforms were not accompanied by product market reforms in some countries, and so wages fell and prices did not adjust in tandem" 21 . While EU directives have been playing a critical role in pushing forward deregulation of upstream sectors at national level (Banerji et al, 2017), a more informed discussion would also facilitate targeted action to deal with the costs induced on those with vested interests, namely by enacting transitory measures that allow for a smoother transition 22 .…”

Section: Conclusion and Way Forwardmentioning

confidence: 99%

Product Markets’ Deregulation: A more Productive, more Effcient and more Resilient Economy?

Gouveia¹,

Monteiro²,

Santa³

2019

HPE-RPE

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Relying on a rich frm-level dataset for one of the top product market reformers among OECD countries over the last decade, we fnd a positive association, already in the short-run, between frm-level productivity and deregulation of intermediate goods sectors. The long-run effects are mediated by frm-level productivity, with gains increasing with the distance to the (national) sectorial technological frontier. As laggard frms are more likely to be held-up by upstream producers with large market power, they have more to gain vis-à-vis more productive frms that are better equipped to deal with the ineffciencies of upstream markets. For the highly productive, the reduction of their competitive edge visà-vis low performers, coupled with decreased markups and increased uncertainty, reduce their incentives to innovate. Importantly, we fnd evidence of positive selection among laggard companies: for viable frms, the reforms unlock their growth potential and allow them to catch-up; for non-viable laggards, the likelihood of exit increases as they are not able to compete in the more demanding environment. In fact, while the increased competition downstream (resulting from increased competition upstream) is associated with higher exit probabilities for all frms, we fnd a stronger association for low productivity frms. Finally, by comparing the performance of frms more and less exposed to precrisis reforms, we show that the survival of the fttest and the unlocking of viable laggards growth boosts the resilience of the frms operating in the market.

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Labor and Product Market Reforms in Advanced Economies: Fiscal Costs, Gains, and Support

Cited by 36 publications

References 9 publications

Subdued Potential Growth: Sources and Remedies

Subdued Potential Growth: Sources and Remedies

The Political Costs of Reforms

Product Markets’ Deregulation: A more Productive, more Effcient and more Resilient Economy?

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