Labor And Product Market Reforms And External Imbalances Evidence From Advanced Economies
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Labor and Product Market Reforms and External Imbalances: Evidence from Advanced Economies by Mr.Romain A Duval,Davide Furceri,João Tovar Jalles Pdf
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.
Labor and Product Market Reforms in Advanced Economies by Angana Banerji,Mr.Valerio Crispolti,Ms.Era Dabla-Norris,Mr.Romain A Duval,Mr.Christian H Ebeke,Davide Furceri,Mr.Takuji Komatsuzaki,Mr.Tigran Poghosyan Pdf
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.
A Narrative Database of Major Labor and Product Market Reforms in Advanced Economies by Romain Duval Pdf
This paper describes a new database of major labor and product market reforms covering 26 advancedeconomies over the period 1970-2013. The focus is on large changes in product market regulation in seven individual network industries, employment protection legislation for regular and temporary workers, and the replacement rate and duration of unemployment benefits. The main advantage of this dataset is the precise identification of the nature and date of major reforms, which is valuable in many empirical applications. By contrast, the dataset does not attempt to measure and compare policy settings across countries, and as such is no substitute for other publicly available indicators produced, for example, by the ILO, the OECD or the World Bank. It should also be seen as work in progress, for researchers to build on and improve upon. Based on the dataset, major reforms appear to have been more frequent in product markets than in labor markets in the last decades, and were predominantly implemented during the 1990s and 2000s.
Labor Market Policies and IMF Advice in Advanced Economies during the Great Recession by Mr.Olivier J Blanchard,Ms.Florence Jaumotte,Mr.Prakash Loungani Pdf
This paper does two things. First, it articulates what are the main implications of theoretical and empirical research for design of labor market policies and labor market institutions. Second, in this light, the paper analyzes the IMF’s labor market recommendations since the beginning of the crisis, both in general, and more specifically in program countries
Employment Protection Deregulation and Labor Shares in Advanced Economies by Gabriele Ciminelli,Mr.Romain A Duval,Davide Furceri Pdf
Labor market deregulation, intended to boost productivity and employment, is one plausible, yet little studied, driver of the decline in labor shares that took place across most advanced economies since the early 1990s. This paper assesses the impact of job protection deregulation in a sample of 26 advanced economies over the period 1970-2015, using a newly constructed dataset of major reforms to employment protection legislation for regular contracts. We apply the local projection method to estimate the dynamic response of the labor share to our reform events at both the country and the country-industry levels. For the latter, we employ a differences-in-differences identification strategy using two identifying assumptions grounded in theory—namely that job protection deregulation should have larger negative effects in industries characterized by (i) a higher “natural” propensity to adjust the workforce, and (ii) a lower elasticity of substitution between capital and labor. We find a statistically significant, economically large and robust negative effect of deregulation on the labor share. In particular, illustrative back-of-the-envelope calculations suggest that job protection deregulation may have contributed about 15 percent to the average labor share decline in advanced economies. Together with existing evidence regarding the macroeconomic gains from job protection and other labor market reforms, our results also point to the need for policymakers to address efficiency-equity trade-offs when designing such reforms.
Can Reform Waves Turn the Tide? Some Case Studies Using the Synthetic Control Method by Bibek Adhikari,Mr.Romain A Duval,Bingjie Hu,Mr.Prakash Loungani Pdf
A number of advanced economies carried out a sequence of extensive reforms of their labor and product markets in the 1990s and early 2000s. Using the Synthetic Control Method (SCM), this paper implements six case studies of well-known waves of reforms, those of New Zealand, Australia, Denmark, Ireland and Netherlands in the 1990s, and the labor market reforms in Germany in the early 2000s. In four of the six cases, GDP per capita was higher than in the control group as a result of the reforms. No difference between the treated country and its synthetic counterpart could be found in the cases of Denmark and New Zealand, which in the latter case may have partly reflected the implementation of reforms under particularly weak macroeconomic conditions. Overall, also factoring in the limitations of the SCM in this context, the results are suggestive of a positive but heterogenous effect of reform waves on GDP per capita.
The Needle in the Haystack: What Drives Labor and Product Market Reforms in Advanced Countries? by Mr.Romain A Duval,Davide Furceri,Jakob Miethe Pdf
The political economy literature has put forward a multitude of hypotheses regarding the drivers of structural reforms, but few, if any, empirically robust findings have emerged thus far. To make progress, we draw a parallel with model uncertainty in the growth literature and provide a new version of the Bayesian averaging of maximum likelihood estimates (BAMLE) technique tailored to binary logit models. Relying on a new database of major past labor and product market reforms in advanced countries, we test a large set of variables for robust correlation with reform in each area. We find widespread support for the crisis-induces-reform hypothesis. Outside pressure increases the likelihood of reform in certain areas: reforms are more likely when other countries also undertake them and when there is formal pressure to implement them. Other robust correlates are more specific to certain areas—for example, international pressure and political factors are most relevant for product market and job protection reforms, respectively.
Structural Reforms by Jakob de Haan,Jante Parlevliet Pdf
This book presents a selection of contributions on the timely topic of structural reforms in Western economies, written by experts from central banks, the International Monetary Fund, and leading universities. It includes latest research on the impacts of structural reforms on the market economy, especially on the labor market, and investigates the results of collective bargaining in theory and practice. The book also comprises case studies of structural reforms. A literature survey on the topic serves as a valuable source for further research. The book is written by and targeted at both academics and policy makers.
Structural Reforms to Accelerate Growth, Ease Policy Trade-offs, and Support the Green Transition in Emerging Market and Developing Economies by Mrs. Nina Budina,Mr. Christian H Ebeke,Ms. Florence Jaumotte,Andrea Medici,Augustus J Panton,Marina M. Tavares,Bella Yao Pdf
In the aftermath of the COVID-19 pandemic, emerging market and developing economies are grappling with economic scarring, social tension, and reduced policy space. Policy actions are already urgently needed to boost growth in the near term and support the ongoing green transition. At the same time, high public debt and persistently high inflation have constrained policy space, posing difficult policy trade-offs. This Staff Discussion Note focuses on emerging market and developing economies and proposes a framework for prioritization, packaging, and sequencing of macrostructural reforms to accelerate growth, alleviate policy trade-offs, and support the green transition. The note shows that prioritizing the removal of the most binding constraints on economic activity, bundling reforms (governance, business deregulation, and external sector reforms), and appropriate sequencing of other reforms (such as labor market and credit sector reforms) can help front-load reform gains. In emerging market and developing economies with large initial structural gaps, the estimated output effects of such a major reform package are sizable—about 4 percent in two years and 8 percent in four years. Achieving higher growth and lower absolute carbon emissions over time requires a well-designed strategy that includes both macrostructural and green reforms.
Jürgen Weller,United Nations. Economic Commission for Latin America and the Caribbean
Author : Jürgen Weller,United Nations. Economic Commission for Latin America and the Caribbean Publisher : Santiago, Chile : ECLAC Page : 228 pages File Size : 43,6 Mb Release : 2001 Category : Capital market ISBN : UCSD:31822029884756
Economic Reforms, Growth and Employment by Jürgen Weller,United Nations. Economic Commission for Latin America and the Caribbean Pdf
In the last ten to fifteen years, profound structural reforms have moved Latin America and the Caribbean from closed, state-dominated economies to ones that are more market-oriented and open. Policymakers expected that these changes would speed up growth. This book is part of a multi-year project to determine whether these expectation have been fulfilled. Analysing the impact of the reforms on employment it is argued that expectations were not fulfilled with respect to the operation of the labour markets. The reforms limited the expansion of employment in some sectors, particularly in tradeable goods. They also created a bias in labour demad for better educated workers which exacerbates inequality. It is thus made clear that the region faces major challenges both in increasing the number of jobs and improving job equality.
2022 Update of the External Balance Assessment Methodology by Mr. Cian Allen,Camila Casas,Mr. Giovanni Ganelli,Luciana Juvenal,Mr. Daniel Leigh,Mr. Pau Rabanal,Cyril Rebillard,Jair Rodriguez,João Tovar Jalles Pdf
The assessment of external positions and exchange rates of member countries is a key mandate of the IMF. The External Balance Assessment (EBA) methodology has provided the framework for conducting external sector assessments by Fund staff since its introduction in 2012. This paper provides the latest version of the EBA methodology, updated in 2022 with additional refinements to the current account and real exchange rate regression models, as well as updated estimates for other components of the EBA methodology. The paper also includes an assessment of how estimated current account gaps based on EBA are associated with future external adjustment.
Author : International Monetary Fund Publisher : International Monetary Fund Page : 257 pages File Size : 46,5 Mb Release : 2015-04-20 Category : Business & Economics ISBN : 9781498344654
Fiscal Policy and Long-Term Growth by International Monetary Fund Pdf
This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific conditions, capacities, and preferences. The paper draws on the Fund’s extensive technical assistance on fiscal reforms as well as several analytical studies, including a novel approach for country studies, a statistical analysis of growth accelerations following fiscal reforms, and simulations of an endogenous growth model.
International Monetary Fund. Fiscal Affairs Dept.,International Monetary Fund. Asia and Pacific Dept,International Monetary Fund. Western Hemisphere Dept.,International Monetary Fund. Strategy, Policy, & Review Department,International Monetary Fund. Secretary's Department,International Monetary Fund. Monetary and Capital Markets Department
Author : International Monetary Fund. Fiscal Affairs Dept.,International Monetary Fund. Asia and Pacific Dept,International Monetary Fund. Western Hemisphere Dept.,International Monetary Fund. Strategy, Policy, & Review Department,International Monetary Fund. Secretary's Department,International Monetary Fund. Monetary and Capital Markets Department Publisher : International Monetary Fund Page : 56 pages File Size : 51,9 Mb Release : 2017-07-28 Category : Business & Economics ISBN : 9781498346597
2017 External Sector Report by International Monetary Fund. Fiscal Affairs Dept.,International Monetary Fund. Asia and Pacific Dept,International Monetary Fund. Western Hemisphere Dept.,International Monetary Fund. Strategy, Policy, & Review Department,International Monetary Fund. Secretary's Department,International Monetary Fund. Monetary and Capital Markets Department Pdf
Global current account imbalances were broadly unchanged in 2016, with minor shifts adding to the reconfiguration under way since 2013. The fall in commodity prices, uneven cyclical recoveries in systemic economies, and differences in policy responses contributed to the rotation of imbalances. Current account surpluses of oil-exporting economies, as a group, shifted from large surpluses to small deficits, while deficits in emerging and developing economies narrowed markedly. At the same time, surpluses and deficits in key advanced economies widened. These trends were generally supported by real exchange rate movements. Overall excess current account imbalances (i.e., deficits or surpluses that deviate from desirable levels) represented about one-third of total global imbalances in 2016, remaining broadly unchanged since 2013, although increasingly concentrated in advanced economies. In particular, excess imbalances narrowed in emerging and developing economies, led by a smaller excess surplus in China and smaller excess deficits in others (Brazil, Indonesia, South Africa, Turkey). This narrowing, however, was accompanied by a widening of excess imbalances in some advanced economies. The persistence of large excess surpluses in several advanced economies (e.g. Germany, Korea, the Netherlands, Singapore, Sweden) remains a distinguishing feature of the constellation of imbalances, an issue that is explored in greater detail in this year’s report. Persistent global excess imbalances suggest that automatic adjustment mechanisms are weak. While the rotation of excess imbalances toward advanced economies—with deficits increasingly concentrated in the United States and United Kingdom—likely entails lower deficit-financing risks in the near term, the increased concentration of deficits in a few economies carries greater risks of disruptive trade policy actions. Diverging stock positions coupled with continued overreliance on demand from debtor countries could also pose risks to global growth and raise the likelihood of disruptive adjustments down the road. With nearly-closed output gaps in most systemic economies, addressing external imbalances in a growth-friendly fashion requires a recalibration of the policy mix in deficit and surplus economies alike. Excess deficit countries should move forward with fiscal consolidation, while gradually normalizing monetary policy in tandem with inflation developments. Excess surplus economies with fiscal space should reduce their reliance on easy monetary policy and allow for greater fiscal stimulus. Where monetary policy is constrained from playing a role, as in individual euro area members, fiscal and structural policies to facilitate relative price adjustments should take priority. Meanwhile, structural policies in excess surplus countries should focus on lifting distortions that constrain domestic demand or limit trade competition; while in excess deficit economies, policies should be directed to improving external competitiveness and overall saving. Protectionist and mercantilist policies should be avoided as they are detrimental to global growth.
World Economic Outlook, October 2007 by International Monetary Fund. Research Dept. Pdf
The global economy grew strongly in the first half of 2007, although turbulence in financial markets has clouded prospects. While the 2007 forecast has been little affected, the baseline projection for 2008 global growth has been reduced by almost 1⁄2 percentage point relative to the July 2007 World Economic Outlook Update. This would still leave global growth at a solid 43⁄4 percent, supported by generally sound fundamentals and strong momentum in emerging market economies. Risks to the outlook, however, are firmly on the downside, centered around the concern that financial market strains could deepen and trigger a more pronounced global slowdown. Thus, the immediate focus of policymakers is to restore more normal financial market conditions and safeguard the expansion. Additional risks to the outlook include potential inflation pressures, volatile oil markets, and the impact on emerging markets of strong foreign exchange inflows. At the same time, longer-term issues such as population aging, increasing resistance to globalization, and global warming are a source of concern.
The Labor Market and Economic Adjustment by Pierre-Richard Agénor Pdf
This paper examines the role of the labor market in the transmission process of adjustment policies in developing countries. It begins by reviewing the recent evidence regarding the functioning of these markets. It then studies the implications of wage inertia, nominal contracts, labor market segmentation, and impediments to labor mobility for stabilization policies. The effect of labor market reforms on economic flexibility and the channels through which labor market imperfections alter the effects of structural adjustment measures are discussed next. The last part of the paper identifies a variety of issues that may require further investigation, such as the link between changes in relative wages and the distributional effects of adjustment policies.
