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The quantification of structural reforms in OECD countries: A new framework

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  • Balázs Égert
  • Peter Gal

Abstract

This document describes and discusses a new supply side framework that quantifies the impact of structural reforms on per capita income in OECD countries. It presents the overall macroeconomic impacts of reforms by aggregating over the effects on physical capital, employment and productivity through a production function. On the basis of reforms defined as observed changes in policies, the paper finds that product market regulation has the largest overall single policy impact five years after the reforms. But the combined impact of all labour market policies is considerably larger than that of product market regulation. The paper also shows that policy impacts can differ at different horizons. The overall long-term effects on GDP per capita of policies transiting through capital deepening can be considerably larger than the 5- to 10-year impacts. By contrast, the long-term impact of policies coming only via the employment rate channel materialises at shorter horizon. La quantification des réformes structurelles dans les pays de l’OCDE : Un nouveau cadre analytique Ce document décrit et discute un nouveau cadre analytique pour quantifier l'impact des réformes structurelles sur le revenu par habitant dans les pays de l'OCDE. Il présente les effets macroéconomiques des réformes en agrégeant les effets sur le capital physique, l'emploi et la productivité via une fonction de production. Sur la base des réformes définies comme des changements observés dans les politiques, le document trouve de manière générale que la réglementation des marchés de produits a le plus grand impact cinq ans après les réformes. Toutefois, l'impact conjugué de réformes touchant l’ensemble des politiques du marché du travail est considérablement plus élevé par rapport à celui découlant de la réforme de la règlementation des marchés de produits. Le document montre également que les impacts des politiques peuvent différer selon les horizons. Les effets à long terme sur le PIB par habitant des politiques passant par une hausse du capital peuvent être considérablement plus importants que les impacts observés après 5 à 10 ans. En revanche, l'impact à long terme des réformes de politiques passant par le canal de l'emploi se concrétise à un horizon plus court.

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  • Balázs Égert & Peter Gal, 2017. "The quantification of structural reforms in OECD countries: A new framework," OECD Economics Department Working Papers 1354, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1354-en
    DOI: 10.1787/2d887027-en
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    Cited by:

    1. Metodij Hadzi-Vaskov, 2018. "Assessing the Macroeconomic Impact of Structural Reforms in Chile," IMF Working Papers 2018/285, International Monetary Fund.
    2. Mr. Babacar Sarr & Mokhtar Benlamine & Zsuzsa Munkacsi, 2019. "The Macroeconomic Effects of Labor and Product Market Reforms in Morocco," IMF Working Papers 2019/222, International Monetary Fund.
    3. Égert, Balázs & Botev, Jarmila & Turner, David, 2020. "The contribution of human capital and its policies to per capita income in Europe and the OECD," European Economic Review, Elsevier, vol. 129(C).
    4. Michal Andrle & Mr. Alvar Kangur & Mr. Mehdi Raissi, 2018. "Italy: Quantifying the Benefits of a Comprehensive Reform Package," IMF Working Papers 2018/060, International Monetary Fund.
    5. Eyal Argov & Shay Tsur, 2019. "A Long-Run Growth Model for Israel," Bank of Israel Working Papers 2019.04, Bank of Israel.
    6. Lastauskas, Povilas & Stakėnas, Julius, 2020. "Labor market reforms and the monetary policy environment," European Economic Review, Elsevier, vol. 128(C).
    7. Broughel, James & Hahn, Robert, 2020. "The Impact of Economic Regulation on Growth: Survey and Synthesis," Working Papers 10409, George Mason University, Mercatus Center.
    8. Nauro F. Campos & Paul De Grauwe & Yuemei Ji, 2017. "Structural Reforms, Growth and Inequality: An Overview of Theory, Measurement and Evidence," CESifo Working Paper Series 6812, CESifo.
    9. Rieth, Malte & Wittich, Jana, 2020. "The impact of ECB policy on structural reforms," European Economic Review, Elsevier, vol. 122(C).
    10. Jarmila Botev & Balazs Egert & David Turner, 2022. "The Effect of Structural Reforms: Do They Differ between GDP and Adjusted Household Disposable Income?," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(12), pages 1-55, December.
    11. Mariana Colacelli & Emilio Fernández Corugedo, 2018. "Macroeconomic Effects of Japan’s Demographics: Can Structural Reforms Reverse Them?," IMF Working Papers 2018/248, International Monetary Fund.
    12. Chantal Kegels & Dirk Verwerft, 2018. "Working Paper 09-18 - Economic impact of professional services reform in Belgium - A DSGE simulation," Working Papers 1809, Federal Planning Bureau, Belgium.
    13. James Broughel & Robert W. Hahn, 2022. "The impact of economic regulation on growth: Survey and synthesis," Regulation & Governance, John Wiley & Sons, vol. 16(2), pages 448-469, April.
    14. David Turner & Hermes Morgavi, 2021. "Revisiting the effect of statutory pension ages on participation and the average age of retirement in OECD countries," Public Sector Economics, Institute of Public Finance, vol. 45(2), pages 257-282.
    15. Igor Fedotenkov & Virmantas Kvedaras & Miguel Sanchez-Martinez, 2024. "Employment protection and labour productivity growth in the EU: skill-specific effects during and after the Great Recession," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(1), pages 209-262, February.
    16. 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.
    17. Manuel Bétin & Tim Bulman & Thomas Chalaux & Boris Cournède & Alain de Serres & Claude Giorno & Yvan Guillemette, 2020. "OECD contribution to the evaluation of the ESM financial assistance programme for Greece," Discussion Papers 12, European Stability Mechanism, revised 27 Oct 2021.
    18. Yvan Guillemette & David Turner, 2018. "The Long View: Scenarios for the World Economy to 2060," OECD Economic Policy Papers 22, OECD Publishing.
    19. Daniel Alonso & María de los Llanos Matea, 2023. "The 2022 European Semester and the Recovery and Resilience Facility," Economic Bulletin, Banco de España, issue 2023/Q1.

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    More about this item

    Keywords

    per capita impact; simulation; structural reforms;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies

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