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The GDP Impact of Reform: A Simple Simulation Framework

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Author Info

  • Sebastian Barnes
  • Romain Bouis
  • Philippe Briard
  • Sean Dougherty
  • Mehmet Eris

Abstract

This paper presents a framework to assess the impact of a wide range of structural policy reforms on GDP per capita at various horizons by linking together previous empirical studies mostly carried out by the OECD. The simple accounting framework consists of reduced-form equations and offers a more tractable and realistic alternative to an estimated general equilibrium model. Though this involves some risks of double counting the effects of certain reforms and omits interactions across different policy areas, the plausible scenarios suggest that the largest long-run GDP per capita gains may be obtained from reforms that would raise the quantity and quality of education, strengthen competition in product markets, reduce the level and/or duration of unemployment benefits, cut labour tax wedges and relax employment protection legislation. Past reforms in these areas might also have contributed to as much as half of GDP per capita growth in OECD countries in the decade prior to the recent financial and economic crisis. Simulations further indicate that addressing all policy weaknesses in each OECD country by aligning policy settings on the OECD average could raise GDP per capita by as much as 25% in the typical country. L'impact des réformes sur le PIB : un cadre simple de simulation Cet article présente un cadre d’analyse pour évaluer l’impact sur le PIB par tête à différents horizons d’un large éventail de réformes de politiques structurelles en reliant ensemble des études empiriques précédemment réalisées pour la plupart par l’OCDE. Le cadre comptable simplifié est constitué d’équations sous forme réduite et offre une alternative plus flexible et plus réaliste qu’un modèle estimé d’équilibre général. Bien que cela implique des risques de double comptage des effets de certaines réformes et l’omission des interactions au sein des différents domaines de politiques, les scénarios plausibles suggèrent que les gains en PIB par tête à long terme les plus élevées pourraient provenir des réformes augmentant la quantité et la qualité de l’éducation, renforçant la concurrence sur le marché des produits, réduisant le niveau et/ou la durée des allocations chômage, diminuant le coin salarial et assouplissant la législation sur la protection de l’emploi. Les réformes passées dans ces domaines pourraient avoir contribué jusqu’à la moitié de la croissance du PIB par tête dans les pays de l’OCDE au cours de la décennie précédant la crise financière et économique récente. Les simulations indiquent en outre que traiter l’ensemble des points faibles de chaque pays de l’OCDE en alignant les positions des politiques sur la moyenne de l’OCDE pourrait accroître le PIB par tête jusqu’à 25% dans le pays moyen.

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File URL: http://dx.doi.org/10.1787/5kgk9qjnhkmt-en
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 834.

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Date of creation: 04 Jun 2013
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Handle: RePEc:oec:ecoaaa:834-en

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Related research

Keywords: growth; productivity; employment; structural reforms; emploi; croissance; productivité; réforme structurelle;

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References

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  1. 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.
  2. Giuseppe Nicoletti & Stefano Scarpetta, 2005. "Product Market Reforms and Employment in OECD Countries," OECD Economics Department Working Papers 472, OECD Publishing.
  3. Florence Jaumotte, 2003. "Female Labour Force Participation: Past Trends and Main Determinants in OECD Countries," OECD Economics Department Working Papers 376, OECD Publishing.
  4. Takeshi Koyama & Stephen S. Golub, 2006. "OECD's FDI Regulatory Restrictiveness Index: Revision and Extension to more Economies," OECD Working Papers on International Investment 2006/4, OECD Publishing.
  5. Giuseppe Nicoletti & Steve Golub & Dana Hajkova & Daniel Mirza & Kwang-Yeol Yoo, 2003. "Policies and International Integration: Influences on Trade and Foreign Direct Investment," OECD Economics Department Working Papers 359, OECD Publishing.
  6. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 24, pages 349-402, 04.
  7. Clovis Kerdrain & Isabell Koske & Isabelle Wanner, 2010. "The Impact of Structural Policies on Saving, Investment and Current Accounts," OECD Economics Department Working Papers 815, OECD Publishing.
  8. Christian Dreger & Manuel Art�s & Rosina Moreno & Raúl Ramos & Jordi Suri�ach, 2007. "Study on the feasibility of a tool to measure the macroeconomic impact of structural reforms," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 272, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  9. Takeshi Koyama & Stephen S. Golub, 2006. "OECD's FDI Regulatory Restrictiveness Index: Revision and Extension to more Economies," OECD Economics Department Working Papers 525, OECD Publishing.
  10. Andrea Bassanini & Romain Duval, 2009. "Unemployment, institutions and reform complementarities: Re-assessing the aggregate evidence for OECD countries," Post-Print halshs-00395144, HAL.
  11. Hervé Boulhol & Alain de Serres & Margit Molnár, 2008. "The contribution of economic geography to GDP per capita," OECD Journal: Economic Studies, OECD Publishing, OECD Publishing, vol. 2008(1), pages 1-37.
  12. Paul Conway & Donato de Rosa & Giuseppe Nicoletti & Faye Steiner, 2006. "Regulation, Competition and Productivity Convergence," OECD Economics Department Working Papers 509, OECD Publishing.
  13. Joaquim Oliveira Martins & Romina Boarini & Hubert Strauss & Christine de la Maisonneuve & Clarice Saadi, 2007. "The Policy Determinants of Investment in Tertiary Education," OECD Economics Department Working Papers 576, OECD Publishing.
  14. Jens Arnold, 2008. "Do Tax Structures Affect Aggregate Economic Growth?: Empirical Evidence from a Panel of OECD Countries," OECD Economics Department Working Papers 643, OECD Publishing.
  15. Bourlès, Renaud & Cette, Gilbert, 2005. "A comparison of structural productivity levels in the major industrialised countries," MPRA Paper 7330, University Library of Munich, Germany.
  16. Orsetta Causa, 2008. "Explaining Differences in Hours Worked among OECD Countries: An empirical analysis," OECD Economics Department Working Papers 596, OECD Publishing.
  17. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Economics Department Working Papers 486, OECD Publishing.
  18. Florence Jaumotte & Nigel Pain, 2005. "From Ideas to Development: The Determinants of R&D and Patenting," OECD Economics Department Working Papers 457, OECD Publishing.
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Citations

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Cited by:
  1. Crafts, Nicholas, 2012. "Western Europe’s Growth Prospects: an Historical Perspective," CAGE Online Working Paper Series 71, Competitive Advantage in the Global Economy (CAGE).
  2. Lusine Lusinyan & Dirk Muir, 2013. "Assessing the Macroeconomic Impact of Structural Reforms The Case of Italy," IMF Working Papers 13/22, International Monetary Fund.
  3. Robert P. Hagemann, 2012. "Fiscal Consolidation: Part 6. What Are the Best Policy Instruments for Fiscal Consolidation?," OECD Economics Department Working Papers 937, OECD Publishing.
  4. Angelini, Elena & Dieppe, Alistair & Pierluigi, Beatrice, 2013. "Learning about wage and price mark-ups in euro area countries," Working Paper Series 1512, European Central Bank.
  5. Nicholas Crafts, 2013. "Long-Term Growth in Europe: What Difference does the Crisis Make?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 224(1), pages R14-R28, May.
  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.

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