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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 Short-Term Effects of Structural Reforms
An Empirical Analysis
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- Romain Bouis1, Orsetta Causa1, Lilas Demmou1, Romain Duval1, Aleksandra Zdzienicka2
- Author Affiliations
- 1: OECD, France
- 2: University of Lyon, France
- 26 Mar 2012
- Bibliographic information
Drawing on new empirical analysis of 30 years of structural reforms across the OECD, this paper sheds light on the impact of reforms over time, identifies the horizon over which their full effects materialise, and investigates whether such effects vary with prevailing economic conditions and institutions. Impulse responses of aggregate outcomes (GDP growth, employment rate) to various labour, product market and tax reforms are estimated at different horizons. This analysis indicates that the benefits from reforms typically take time to fully materialise. When significant effects are found in the short run, reforms seldom involve significant aggregate economic losses; on the contrary they often deliver some benefits. The absence of major depressing effects does not lend support to the view that reforms should be in general accompanied by substantial macroeconomic policy easing in order to deliver some short-term gains. Nevertheless, there is also tentative evidence that some labour market reforms (e.g. of unemployment benefit systems and job protection) pay off more quickly in good times than in bad times, and can even entail short-term losses in severely depressed economies.
- JEL Classification:
- E02: Macroeconomics and Monetary Economics / General / Institutions and the Macroeconomy
- E21: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Consumption; Saving; Wealth
- E22: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Investment; Capital; Intangible Capital; Capacity
- E24: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E60: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / General
- J21: Labor and Demographic Economics / Demand and Supply of Labor / Labor Force and Employment, Size, and Structure
- J23: Labor and Demographic Economics / Demand and Supply of Labor / Labor Demand
- J38: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / Public Policy
- J58: Labor and Demographic Economics / Labor-Management Relations, Trade Unions, and Collective Bargaining / Public Policy
- J68: Labor and Demographic Economics / Mobility, Unemployment, Vacancies, and Immigrant Workers / Public Policy