Labor and Product Market Reforms in Advanced Economies: Fiscal Costs, Gains, and Support
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
Summary:
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.
Series:
Staff Discussion Notes No. 2017/003
Subject:
Employment Fiscal policy Fiscal stimulus Labor Labor market reforms Tax incentives
English
Publication Date:
March 13, 2017
ISBN/ISSN:
9781475583977/2617-6750
Stock No:
SDNEA2017003
Pages:
120
Please address any questions about this title to publications@imf.org