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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Labour market reform, 1994 and 1997

In an effort to address longstanding rigidities in the labour market, Spain substantially liberalized temporary employment contracts in the middle of the 1980s without relaxing employment protection legislation for permanent workers. This led to an increase in the use of temporary contracts, which soon came to be recognized as a serious problem in its own right. In order to reduce this labour-market dualism, Spain adopted reforms 1994 and 1997 that sought to diminish incentives to use temporary contracts and to make indefinite contracts less expensive. Both reforms were accompanied by changes to the system of collective bargaining.

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