The Political Economy of Reform

Lessons from Pensions, Product Markets and Labour Markets in Ten OECD Countries

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This report examines why some policy reforms get implemented and others languish by examining 20 structural reform efforts in 10 OECD countries over the past two decades. The case studies cover a wide variety of reform attempts in three key areas: pensions, labour- and product-market regulation. Key factors in the political, economic and reform-specific arenas are identified as helping or hindering reform, and these findings are cross-checked using a relatively simple set of Spearman rank correlations. The report’s two-pronged analytical approach – quantitative and qualitative – results in unique insights for policy makers designing, adopting and implementing structural policy reforms.

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The Treu (1997) and Biagi (2002) reforms

Labour-market reform in Italy has been an incremental process over more than a decade, but the two principal landmarks have been the Treu and Biagi reforms of 1997 and 2003. The September 1996 True package aimed to increase employment with special provisions for the economically depressed south. The 2003 Biagi law was the most controversial labour-market reform adopted under the centre-right government of Silvio Berlusconi. It aimed to take some of the Treu reforms further, in order to increase employment among youth, women, older workers and job-seekers. These reforms sought to create greater opportunities for new entrants and labour-market outsiders. Both these reforms were driven by EU-related policy considerations. While all social partners agreed to the Treu reform, the adoption of the Biagi law followed a long confrontation between the government and the unions.

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