Labor and Product Market Reforms and External Imbalances: Evidence from Advanced Economies
Labor and Product Market Reforms and External Imbalances: Evidence from Advanced Economies

Author: Mr.Romain A Duval

Publisher: International Monetary Fund

Published: 2021-02-26

Total Pages: 31

ISBN-13: 1513570749

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We explore the impact of major labor and product market reforms on current account dynamics using a new “narrative” database of major changes in employment protection for regular workers and product market regulation for non-manufacturing industries covering 26 advanced economies over the past four decades. Our main finding is that product market deregulation is associated with a weakening of the current account, while labor market deregulation is associated with an improvement. These effects are transitory and driven by both saving and investment responses. Labor and product market reforms both have a more positive impact on the current account balance when implemented under weak macroeconomic conditions. Our results are broadly consistent with predictions from recent DSGE models with endogenous producer entry and labor market frictions.

The Short-Term Impact of Product Market Reforms
The Short-Term Impact of Product Market Reforms

Author: Peter N. Gal

Publisher: International Monetary Fund

Published: 2016-06-10

Total Pages: 71

ISBN-13: 1475516851

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This paper analyzes the effects of product market reforms in the short and medium term across 10 regulated industries and 18 advanced economies for the period 1998-2013 using internationally comparable firm-level data based on Orbis. It provides four key insights. First, product market reforms have positive effects on capital, output and employment and their effects increase over time. After two years, they raise capital by 4%, output by 3% and employment by 1.5%. Second, differences in production technology and the nature of product market regulations across sectors generate important differences in the mechanisms through which reforms operate. In network industries, reforms tend to benefit small firms, while the opposite is observed in retail trade. Product market reforms also promote firm entry, particularly those that reduce entry barriers. Third, credit constraints can play an important role in weakening the positive impact of product market reform on investment. Fourth, product market reforms also tend to have positive effects on firms in downstream sectors—both at home and abroad—that make intensive use of intermediate inputs from deregulated sectors.

Labor and Product Market Reforms in Advanced Economies
Labor and Product Market Reforms in Advanced Economies

Author: Angana Banerji

Publisher: International Monetary Fund

Published: 2017-03-13

Total Pages: 120

ISBN-13: 1475583974

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Product and labor market reforms are needed to lift persistently sluggish growth in advanced economies. But reforms have progressed slowly because of concerns about their distributive and short-term economic effects. Our analysis, based on new empirical and numerical analysis and country case-studies shows that most labor and product market reforms can improve public debt dynamics over the medium-term. This because reforms raise output by boosting employment and/or labor productivity. But the effect of some labor market reforms on budgetary outcomes and fiscal sustainability depends critically on business cycle conditions. Our evidence also suggests that some temporary and well-designed up-front fiscal stimulus can help enhance the economic impact of reforms. In the past, countries have used fiscal incentives in the past to facilitate reforms by alleviating transition and social costs. But strong ownership of reforms was crucial for their successful implementation.

What is the Impact of Increased Business Competition?
What is the Impact of Increased Business Competition?

Author: Sónia Félix

Publisher: International Monetary Fund

Published: 2019-12-13

Total Pages: 57

ISBN-13: 1513521519

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This paper studies the macroeconomic effect and underlying firm-level transmission channels of a reduction in business entry costs. We provide novel evidence on the response of firms' entry, exit, and employment decisions. To do so, we use as a natural experiment a reform in Portugal that reduced entry time and costs. Using the staggered implementation of the policy across the Portuguese municipalities, we find that the reform increased local entry and employment by, respectively, 25% and 4.8% per year in its first four years of implementation. Moreover, around 60% of the increase in employment came from incumbent firms expanding their size, with most of the rise occurring among the most productive firms. Standard models of firm dynamics, which assume a constant elasticity of substitution, are inconsistent with the expansionary and heterogeneous response across incumbent firms. We show that in a model with heterogeneous firms and variable markups the most productive firms face a lower demand elasticity and expand their employment in response to increased entry.

Economic Policy Reforms 2012 Going for Growth
Economic Policy Reforms 2012 Going for Growth

Author: OECD

Publisher: OECD Publishing

Published: 2012-02-24

Total Pages: 223

ISBN-13: 9264168443

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Going for Growth is the OECD’s annual report highlighting developments in structural policies in OECD countries. It identifies structural reform priorities to boost real income for each OECD country and key emerging economies.

Labour Market Reforms in Portugal 2011-15 A Preliminary Assessment
Labour Market Reforms in Portugal 2011-15 A Preliminary Assessment

Author: OECD

Publisher: OECD Publishing

Published: 2017-02-21

Total Pages: 179

ISBN-13: 9264269576

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This report evaluates the comprehensive labour market reforms undertaken in Portugal in 2011-15. It reviews reforms in employment protection legislation, unemployment benefits, activation, collective bargaining, minimum wages and working time, and assesses the available evidence on their impact.

Regulation, Productivity and Growth
Regulation, Productivity and Growth

Author: Giuseppe Nicoletti

Publisher: World Bank Publications

Published: 2003

Total Pages: 68

ISBN-13:

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In this paper, we relate the scope and depth of regulatory reforms to growth outcomes in OECD countries. By means of a new set of quantitative indicators of regulation, we show that the cross-country variation of regulatory settings has increased in recent years, despite extensive liberalisation and privatisation in the OECD area. We then look at the regulation-growth linkage using data that cover a large set of manufacturing and service industries over the past two decades. We focus on multifactor productivity (MFP), which plays a crucial role in GDP growth and accounts for a significant share of its cross-country variance. We find evidence that reforms promoting private governance and competition (where these are viable) tend to boost productivity. Both privatisation and entry liberalisation are estimated to have a positive impact on productivity. In manufacturing the gains are greater the further a given country is from the technology leader, suggesting that regulation limiting ...

The Macroeconomic Effects of Labor and Product Market Reforms in Morocco
The Macroeconomic Effects of Labor and Product Market Reforms in Morocco

Author: Mr.Babacar Sarr

Publisher: International Monetary Fund

Published: 2019-10-11

Total Pages: 35

ISBN-13: 1513513761

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This paper studies the macroeconomic effects and sequencing of (LMRs) and product (PMRs) market reforms in Morocco. It finds that introducing LMRs and PMRs simultaneously would add about 2.5 percentage points (pp) of GDP growth and reduce unemployment by about 2.2 pp after five years. If sequencing is required, starting with PMRs would be more effective in boosting output, while starting with LMRs would reduce unemployment faster. Finally, increasing unemployment benefits would be more effective if this reform takes place after the implementation of LMRs and PMRs.