- 1815-1973 (online)
Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
The GDP Impact of Reform
A Simple Simulation Framework
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- Sebastian Barnes1, Romain Bouis1, Philippe Briard2, Sean Dougherty1, Mehmet Eris1
- Author Affiliations
- 1: OECD, France
- 2: Ministry of Employment, France
- 04 June 2013
- Bibliographic information
This paper presents a framework to assess the impact of a wide range of structural policy reforms on GDP per capita at various horizons by linking together previous empirical studies mostly carried out by the OECD. The simple accounting framework consists of reduced-form equations and offers a more tractable and realistic alternative to an estimated general equilibrium model. Though this involves some risks of double counting the effects of certain reforms and omits interactions across different policy areas, the plausible scenarios suggest that the largest long-run GDP per capita gains may be obtained from reforms that would raise the quantity and quality of education, strengthen competition in product markets, reduce the level and/or duration of unemployment benefits, cut labour tax wedges and relax employment protection legislation. Past reforms in these areas might also have contributed to as much as half of GDP per capita growth in OECD countries in the decade prior to the recent financial and economic crisis. Simulations further indicate that addressing all policy weaknesses in each OECD country by aligning policy settings on the OECD average could raise GDP per capita by as much as 25% in the typical country.
- productivity, structural reforms, growth, employment
- JEL Classification:
- E27: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Forecasting and Simulation: Models and Applications
- O43: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Institutions and Growth
- O47: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence