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Openness And Structural Labor Market Reforms: Ex Ante Counterfactuals

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  • Povilas Lastauskas
  • Julius Stakenas

Abstract

In this paper we examine plausible macroeconomic responses to the ex ante (planned but not implemented yet) reforms in the labor market, taking a currently proposed Social Model in Lithuania as an example. We contribute not only to the current debate on the efficacy of announced structural reforms, but also to the literature on policy evaluation, by assessing reforms from a global perspective. Taking trade linkages and openness into account, we demonstrate macroeconomic reactions to shocks in unemployment benefits, active labor market policies, and tax wedge on the reforming economy. In particular, we show that the omission of an international dimension could lead to seriously biased results on policy effects for any open and small economy. Using a satellite model for the intermediate trade, we link the global framework with the sectoral extensive margin, which changes some of the results derived from the aggregate data. (JEL C33, C54, E62, J38)

Suggested Citation

  • Povilas Lastauskas & Julius Stakenas, 2018. "Openness And Structural Labor Market Reforms: Ex Ante Counterfactuals," Contemporary Economic Policy, Western Economic Association International, vol. 36(4), pages 723-757, October.
    • Handle: RePEc:bla:coecpo:v:36:y:2018:i:4:p:723-757
    DOI: 10.1111/coep.12280
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    Cited by:

    1. Povilas Lastauskas & Julius Stakenas, 2019. "Does It Matter When Labor Market Reforms Are Implemented? The Role of the Monetary Policy Environment," Bank of Lithuania Working Paper Series 66, Bank of Lithuania.
    2. Lastauskas, Povilas & Stakėnas, Julius, 2020. "Labor market reforms and the monetary policy environment," European Economic Review, Elsevier, vol. 128(C).
    3. Povilas Lastauskas, 2022. "Lockdown, employment adjustment, and financial frictions," Small Business Economics, Springer, vol. 58(2), pages 919-942, February.

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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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