OECD Economic Policy Papers

The OECD Economic Policy Papers series is designed to make available selected studies on structural and macro-economic policy issues of current interest. The Papers are produced in the context of the work carried out on the two regular OECD titles, OECD Economic Outlook and Going for Growth.


Structural reforms and income distribution

This paper provides new empirical evidence on the effects of structural policies on household disposable incomes at different income levels. More specifically, it investigates the extent to which structural policies have differential long-run impacts on GDP per capita and on household incomes at different points of the distribution. One aim is to verify whether policy decisions may face tradeoffs between objectives of economic efficiency and equity. Many growth enhancing structural reforms are found to deliver stronger income gains for households at the lower end of the distribution compared with the average household, an indication that they may reduce inequality in disposable incomes. Such is the case of reducing regulatory barriers to domestic competition as well as to trade and FDI; stepping-up job-search support and activation programmes. Conversely, other reforms involve trade-offs between the efficiency and equity objective. This is the case of the tightening of unemployment benefits for the long-term unemployed, which is found to lift GDP per capita and average household incomes, but also to reduce disposable incomes at the lower end of the distribution.


Keywords: cross-country analysis, income distribution, structural reforms, inequality
JEL: J18: Labor and Demographic Economics / Demographic Economics / Demographic Economics: Public Policy; H31: Public Economics / Fiscal Policies and Behavior of Economic Agents / Fiscal Policies and Behavior of Economic Agents: Household; J6: Labor and Demographic Economics / Mobility, Unemployment, Vacancies, and Immigrant Workers; I13: Health, Education, and Welfare / Health / Health Insurance, Public and Private; J3: Labor and Demographic Economics / Wages, Compensation, and Labor Costs; I24: Health, Education, and Welfare / Education and Research Institutions / Education and Inequality; C33: Mathematical and Quantitative Methods / Multiple or Simultaneous Equation Models; Multiple Variables / Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models; H2: Public Economics / Taxation, Subsidies, and Revenue; D31: Microeconomics / Distribution / Personal Income, Wealth, and Their Distributions; J38: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / Wages, Compensation, and Labor Costs: Public Policy
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