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Structural Reforms in the EU: A simulation-based analysis using the QUEST model with endogenous growth

Author

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  • Werner Roeger
  • Janos Varga
  • Jan in 't Veld

Abstract

This paper describes the endogenous growth version of the QUEST III model and uses it to analyse the macroeconomic impact of various structural reform measures. This paper describes a micro-founded DSGE model with endogenous growth that is used to analyse the macroeconomic impact of structural reforms in Europe. The new QUEST III model is a useful tool for analysing the costs and benefits of reforms in terms of concrete and quantifiable policy measures, in particular fiscal policy instruments such as taxes, benefits, subsidies and education expenditures, administrative costs faced by firms and regulatory indices. Our results confirm the beneficial effects on output and employment of skill-biased tax reforms, measures that improve the skill composition of the labour force, R&D subsidies, raising competition in final goods market, increased financial market integration and measures that remove entry barriers in certain markets. The model also allows us to examine the adjustment path and the time lags involved before these benefits can be reaped.

Suggested Citation

  • Werner Roeger & Janos Varga & Jan in 't Veld, 2008. "Structural Reforms in the EU: A simulation-based analysis using the QUEST model with endogenous growth," European Economy - Economic Papers 2008 - 2015 351, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecopap:0351
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    More about this item

    Keywords

    Structural reforms; endogenous growth; R&D; DSGE modelling; Roeger; Varga ; in 't Veld; Structural Reforms in the EU: A simulation-based analysis using the QUEST model with endogenous growth;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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