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Distributional Implications of Labor Market Reforms: Learning from Spain's Experience

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  • Ara Stepanyan
  • Jorge Salas

Abstract

Spain’s structural reforms, implemented around 2012, have arguably contributed to a faster and stronger economic recovery. In particular, there is strong evidence that the 2012 labor market reforms increased wage flexibility, which helped the Spanish economy to regain competitiveness and create jobs. But the impact of these labor reforms on income inequality and social inclusion has not been analyzed much. This paper aims to shed light on this issue by employing an econometric decomposition procedure combined with the synthetic control method. The results indicate that the 2012 labor reforms have helped improve employment and income equality outcomes with no substantial impact on the overall risk of poverty. Nevertheless, the reforms appear to have induced a deterioration of average hours worked, in-work poverty, and possibly also of involuntary part-time employment.

Suggested Citation

  • Ara Stepanyan & Jorge Salas, 2020. "Distributional Implications of Labor Market Reforms: Learning from Spain's Experience," IMF Working Papers 2020/029, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2020/029
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    Cited by:

    1. Georgios Gatopoulos & Alexandros Louka & Ioannis Polycarpou & Nikolaos Vettas, 2021. "Evaluating the Impact of Labour Market Reforms in Greece during 2010-2018," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 156, Hellenic Observatory, LSE.
    2. Ramon Xifré, 2020. "The Political Value of Internal Devaluation in the Euro Area Crisis," Global Policy, London School of Economics and Political Science, vol. 11(4), pages 466-477, September.
    3. Bod’a, Martin & Považanová, Mariana, 2021. "Output-unemployment asymmetry in Okun coefficients for OECD countries," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 307-323.
    4. Cristina Lafuente & Raül Santaeulàlia-Llopis & Ludo Visschers, 2022. "Temping fates in Spain: hours and employment in a dual labor market during the Great Recession and COVID-19," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 13(1), pages 101-145, May.
    5. Benito Arruñada, 2021. "La seguridad jurídica en España. Documento de discusión (versión revisada y comentada)," Studies on the Spanish Economy eee2021-18, FEDEA.

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