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Speed of Adjustment to Selected Labour Market and Tax Reforms

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  • Annabelle Mourougane
  • Lukas Vogel

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.

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File URL: http://dx.doi.org/10.1787/234217500715
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 647.

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Date of creation: 28 Oct 2008
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Handle: RePEc:oec:ecoaaa:647-en

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

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Cited by:
  1. Martin Schindler, 2009. "The Italian Labor Market," IMF Working Papers 09/47, International Monetary Fund.
  2. 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.
  3. Davide Furceri & Annabelle Mourougane, 2009. "How do Institutions Affect Structural Unemployment in Times of Crises?," OECD Economics Department Working Papers 730, OECD Publishing.
  4. Zuzana Brixiova & Balazs Egert, 2012. "Labour Market Reforms And Outcomes In Estonia," William Davidson Institute Working Papers Series wp1027, William Davidson Institute at the University of Michigan.
  5. Zuzana Brixiova, 2009. "Labour Market Flexibility in Estonia: What more Can be Done?," OECD Economics Department Working Papers 697, OECD Publishing.

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