Job Creation in Spain: Productivity Growth, Labour Market Reforms or both?
AbstractThe benefits implied by changing the growth model are at the heart of the heated political and economic debate in Spain. Increases in productivity and the reallocation of employment towards more innovative sectors are defended as the panacea for most of the ills afflicting the Spanish economy. In this paper we use a DSGE model with price rigidities, and labour market search frictions a la Mortensen-Pissarides, to assess the effects of the change in the growth model on unemployment. In so doing, we assume that the vigorous demand shock which has been mostly responsible for recent economic growth in Spain will be successfully substituted by a productivity shock as the main driver of Spain‘s economic growth in the future. So we assume that we actually succeed in the so called "change in the growth model". We show that whatever the benefits that this change might bring to the Spanish economy, the time span needed to bring the unemployment rate down to the European average actually increases. We then analyze the impact of several reforms in the labour market and evaluate their interaction with the new growth model. We conclude that changes in the economic structure do not make labour reforms any less necessary, but rather the opposite if we want to shorten employment recovery significantly.
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Bibliographic InfoPaper provided by International Economics Institute, University of Valencia in its series Working Papers with number 0903.
Length: 27 pages
Date of creation: Nov 2009
Date of revision:
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Other versions of this item:
- Jose Emilio Bosca & Javier Ferri & Javier Andres & Rafael Domenech, 2010. "Job creation in Spain: Productivity, growth, labour market reforms or both," Working Papers 1013, BBVA Bank, Economic Research Department.
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-11 (All new papers)
- NEP-DGE-2009-12-11 (Dynamic General Equilibrium)
- NEP-FDG-2009-12-11 (Financial Development & Growth)
- NEP-LAB-2009-12-11 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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