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Speed of Adjustment to Selected Labour Market and Tax Reforms

Author

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  • Annabelle Mourougane

    (OECD)

  • Lukas Vogel

    (OECD)

Abstract

This paper examines the nature and the length of economic adjustments to selected structural reforms, drawing on a variety of approaches: descriptive analysis and simulations using Dynamic General Equilibrium and macro-economic neo-Keynesian models. The descriptive analysis suggests that the correlation between reforms, including a change in the tax wedge, the replacement ratio or anti-competitive product market regulation and the structural unemployment rate peaks only after 5 to 10 years. Lowering employment and price adjustment costs in the euro area to their respective US levels would only have a relatively limited effect on the speed of adjustment to labour market and tax reforms. Monetary policy reaction can speed up the adjustment to a new equilibrium, though to a varying degree in the different OECD countries or regions. In particular, reforms in individual euro area countries are likely to trigger only little or no policy reaction, unless there is an area-wide effort to implement reforms. Vitesse d'ajustement à des réformes sur le marché du travail et de la fiscalité Cet article examine la nature et la durée des ajustements économiques à un certain nombre de réformes structurelles, utilisant plusieurs approches : analyse descriptive et simulations des modèles dynamique d’équilibre général et macro-économiques néo-keynésiens, L’analyse descriptive suggère que la corrélation entre des réformes, notamment une modification du coin fiscal, du taux de remplacement et des régulations anticoncurrentielles sur le marché des produits et le taux de chômage structurel n’atteint son effet maximum qu’après 5 à 10 ans. Diminuer les coûts d’ajustement sur l’emploi et les prix de la zone euro à leur niveau observé aux États-Unis ne se traduirait que par des effets limités sur la vitesse d’ajustements aux réformes sur le marché du travail ou aux réformes fiscales. Une réaction de politique monétaire peut accélérer l’ajustement à un nouvel équilibre, mais de manière plus ou moins marquée dans les différents pays ou régions de l’OCDE. En particulier, les réformes menées au niveau des pays individuels généreront probablement peu ou pas de réaction monétaire, sauf en présence d’un effort concerté de mise en oeuvre de réformes au niveau de la zone.

Suggested Citation

  • Annabelle Mourougane & Lukas Vogel, 2008. "Speed of Adjustment to Selected Labour Market and Tax Reforms," OECD Economics Department Working Papers 647, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:647-en
    DOI: 10.1787/234217500715
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    Cited by:

    1. Zuzana Brixiova & Balázs Égert, 2012. "Labour Market Reforms and Outcomes in Estonia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(1), pages 103-120, March.
    2. Mr. Martin Schindler, 2009. "The Italian Labor Market: Recent Trends, Institutions, and Reform Options," IMF Working Papers 2009/047, International Monetary Fund.
    3. Zuzana Brixiova, 2009. "Labour Market Flexibility In Estonia: What More Can Be Done?," William Davidson Institute Working Papers Series wp964, William Davidson Institute at the University of Michigan.
    4. Aida Caldera Sánchez & Alain de Serres & Naomitsu Yashiro, 2017. "Reforming in a Difficult Macroeconomic Context: A Review of Issues and Recent Literature," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 1-41, February.
    5. Annabelle Mourougane & Lukas Vogel, 2009. "Speed of Adjustment to Selected Labour Market and Tax Reforms," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 51(4), pages 500-519, December.
    6. Romain Bouis & Romain Duval, 2011. "Raising Potential Growth After the Crisis: A Quantitative Assessment of the Potential Gains from Various Structural Reforms in the OECD Area and Beyond," OECD Economics Department Working Papers 835, OECD Publishing.
    7. d'Agostino, Giorgio & Pieroni, Luca & Scarlato, Margherita, 2015. "Revisiting the Effects of Enhanced Flexibility on the Italian Labour Market," MPRA Paper 63239, University Library of Munich, Germany.
    8. Boardman, Anthony E. & Vining, Aidan R. & Weimer, David L., 2016. "The long-run effects of privatization on productivity: Evidence from Canada," Journal of Policy Modeling, Elsevier, vol. 38(6), pages 1001-1017.
    9. repec:wdi:papers:2011-1027 is not listed on IDEAS
    10. d'Agostino, Giorgio & Pieroni, Luca & Scarlato, Margherita, 2018. "Evaluating the effects of labour market reforms on job flows: The Italian case," Economic Modelling, Elsevier, vol. 68(C), pages 178-189.
    11. Annabelle Mourougane & Lukas Vogel, 2008. "Short-Term Distributional Effects of Structural Reforms: Selected Simulations in a DGSE Framework," OECD Economics Department Working Papers 648, OECD Publishing.
    12. Davide Furceri & Annabelle Mourougane, 2012. "How Do Institutions Affect Structural Unemployment in Times of Crises?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(4), pages 393-419, September.

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    More about this item

    Keywords

    adjustment costs; adjustment speed; coûts d’ajustement; DSGE model; euro area; modèle DSGE; modèle néo-keynésiens; monetary policy; neo-Keynesian models; politique monétaire; règle de Taylor; réforme structurelle; structural reforms; Taylor rule; United States; vitesse d’ajustement; zone Euro; États-Unis;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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