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Raising Potential Growth After the Crisis: A Quantitative Assessment of the Potential Gains from Various Structural Reforms in the OECD Area and Beyond

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  • Romain Bouis
  • Romain Duval

Abstract

This paper provides an illustrative assessment of the impacts on potential GDP over a 5 to 10-year horizon of structural reform scenarios in the areas of product and labour markets, relying on existing OECD empirical studies. Results of simulations suggest that a gradual alignment of product market regulations to best practice in a broad range of non-manufacturing sectors could boost aggregate labour productivity levels by several per cent over the next decade in many OECD countries, and by over five per cent across most of continental Europe, as well as for the BRIICS. Relaxation of job protection legislation could also raise productivity growth for a while in many OECD and non-OECD G20 countries, although the effects are estimated to be smaller than those from product market reforms. In a scenario under which they would be phased in relatively quickly, labour market reforms in the areas of unemployment benefit systems, activation policies, labour taxes and pension systems could raise employment rates by several percentage points in a number of OECD countries over a 10-year horizon. Large continental European countries would have the largest benefits to reap from reforms. The overall potential GDP gain for the average OECD country from undertaking the full range of reforms considered here might come close to 10% at a 10-year horizon, indicating the presence of ample room for structural reforms to offset the permanent GDP losses from the recent crisis. Augmenter la croissance potentielle après la crise : une évaluation quantitative des gains potentiels de différentes réformes structurelles au sein de l'OCDE et au-delà Cet article fourni une évaluation illustrative des impacts sur le PIB potentiel à des horizons de 5 et 10 ans de scénarios de réformes structurelles dans les domaines des marchés des produits et du travail, à partir de travaux empiriques de l’OCDE. Les résultats des simulations suggèrent qu’un alignement graduel des réglementations du marché des produits dans un large ensemble de secteurs non manufacturiers aux meilleurs pratiques pourrait augmenter la productivité agrégée du travail de plusieurs pour cent au cours de la prochaine décennie dans plusieurs pays de l’OCDE, et de plus de cinq pour cent au sein de la plupart des pays d’Europe continentale, ainsi que dans les BRIICS. Un relâchement de la législation sur la protection de l’emploi pourrait augmenter la croissance de la productivité d’un montant non négligeable dans plusieurs pays de l’OCDE et pays non OCDE membres du G20, bien que les effets estimés soient plus faibles que ceux attendus de réformes du marché des produits. Dans un scénario dans lequel elles seraient mises en oeuvre assez rapidement, les réformes du marché du travail dans les domaines des systèmes d’indemnisation chômage, de politiques d’activation, de fiscalité du travail et de systèmes de retraite pourraient augmenter les taux d’emploi de plusieurs points de pourcentage dans plusieurs pays de l’OCDE à un horizon de 10 ans sous un scénario de mise en oeuvre rapide. Le gain en PIB potentiel pour le pays moyen de l’OCDE d’une mise en oeuvre de l’ensemble des réformes considérées ici pourrait approcher 10 % à un horizon de 10 ans, indiquant la présence de gains substantiels liés aux réformes structurelles susceptibles de compenser les pertes définitives en PIB consécutives à la crise récente.

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File URL: http://dx.doi.org/10.1787/5kgk9qj18s8n-en
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 835.

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Date of creation: 18 Jan 2011
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Handle: RePEc:oec:ecoaaa:835-en

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

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References

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  1. Romain Duval, 2003. "The Retirement Effects of Old-Age Pension and Early Retirement Schemes in OECD Countries," OECD Economics Department Working Papers 370, OECD Publishing.
  2. Renaud Bourlès & Gilbert Cette & Jimmy Lopez & Jacques Mairesse & Giuseppe Nicoletti, 2010. "Do Product Market Regulations in Upstream Sectors Curb Productivity Growth?: Panel Data Evidence for OECD Countries," OECD Economics Department Working Papers 791, OECD Publishing.
  3. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries," Economic Policy, CEPR & CES & MSH, vol. 24, pages 349-402, 04.
  4. Luiz de Mello & Pier Carlo Padoan, 2010. "Promoting Potential Growth: The Role of Structural Reform," OECD Economics Department Working Papers 793, OECD Publishing.
  5. Bourlès, Renaud & Cette, Gilbert, 2005. "A comparison of structural productivity levels in the major industrialised countries," MPRA Paper 7330, University Library of Munich, Germany.
  6. Annabelle Mourougane & Lukas Vogel, 2008. "Speed of Adjustment to Selected Labour Market and Tax Reforms," OECD Economics Department Working Papers 647, OECD Publishing.
  7. Andrea Bassanini & Romain Duval, 2009. "Unemployment, institutions, and reform complementarities: re-assessing the aggregate evidence for OECD countries," Oxford Review of Economic Policy, Oxford University Press, vol. 25(1), pages 40-59, Spring.
  8. Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "From Financial Crash to Debt Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 1676-1706, August.
  9. Valerie Cerra & Sweta Chaman Saxena, 2007. "Growth dynamics: the myth of economic recovery," BIS Working Papers 226, Bank for International Settlements.
  10. Renaud Bourlès & Gilbert Cette & Jimmy Lopez & Jaques Mairesse & Giuseppe Nicoletti, 2010. "The Impact on Growth of Easing Regulation in Upstream Sectors," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 8(3), pages 8-12, October.
  11. Davide Furceri & Annabelle Mourougane, 2009. "The Effect of Financial Crises on Potential Output: New Empirical Evidence from OECD Countries," OECD Economics Department Working Papers 699, OECD Publishing.
  12. Paul Conway & Donato de Rosa & Giuseppe Nicoletti & Faye Steiner, 2006. "Product market regulation and productivity convergence," OECD Economic Studies, OECD Publishing, vol. 2006(2), pages 39-76.
  13. Davide Furceri & Annabelle Mourougane, 2012. "How Do Institutions Affect Structural Unemployment in Times of Crises?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(4), pages 393-419, September.
  14. 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.
  15. Danielle Venn, 2009. "Legislation, Collective Bargaining and Enforcement: Updating the OECD Employment Protection Indicators," OECD Social, Employment and Migration Working Papers 89, OECD Publishing.
  16. Sebastian Barnes & Romain Bouis & Philippe Briard & Sean Dougherty & Mehmet Eris, 2013. "The GDP Impact of Reform: A Simple Simulation Framework," OECD Economics Department Working Papers 834, OECD Publishing.
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Citations

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Cited by:
  1. Sebastian Barnes & Romain Bouis & Philippe Briard & Sean Dougherty & Mehmet Eris, 2013. "The GDP Impact of Reform: A Simple Simulation Framework," OECD Economics Department Working Papers 834, OECD Publishing.
  2. Carlos De Resende & Claudia Godbout & René Lalonde & Eric Morin & Nikita Perevalov, 2012. "On the Adjustment of the Global Economy," Bank of Canada Review, Bank of Canada, vol. 2012(Spring), pages 1-15.
  3. Douglas Sutherland & Peter Hoeller & Rossana Merola, 2012. "Fiscal Consolidation: Part 1. How Much is Needed and How to Reduce Debt to a Prudent Level?," OECD Economics Department Working Papers 932, OECD Publishing.
  4. Isabell Koske & Jean-Marc Fournier & Isabelle Wanner, 2012. "Less Income Inequality and More Growth – Are They Compatible? Part 2. The Distribution of Labour Income," OECD Economics Department Working Papers 925, OECD Publishing.
  5. Bergljot Barkbu & Jesmin Rahman & Rodrigo O. Valdés, 2012. "Fostering Growth in Europe Now," IMF Staff Discussion Notes 12/07, International Monetary Fund.
  6. Rossana Merola & Douglas Sutherland, 2013. "Fiscal Consolidation and the Implications of Social Spending for Long-Term Fiscal Sustainability," Review of Economics and Institutions, Università di Perugia, vol. 4(3).
  7. Rossana Merola & Douglas Sutherland, 2012. "Fiscal Consolidation: Part 3. Long-Run Projections and Fiscal Gap Calculations," OECD Economics Department Working Papers 934, OECD Publishing.
  8. Douglas Sutherland & Peter Hoeller, 2013. "Growth-promoting Policies and Macroeconomic Stability," OECD Economics Department Working Papers 1091, OECD Publishing.
  9. Pier Carlo Padoan & Urban Sila & Paul van den Noord, 2012. "Avoiding Debt Traps: Financial Backstops and Structural Reforms," OECD Economics Department Working Papers 976, OECD Publishing.
  10. Douglas Sutherland & Peter Hoeller, 2014. "Growth Policies and Macroeconomic Stability," OECD Economic Policy Papers 8, OECD Publishing.
  11. Lusine Lusinyan & Dirk Muir, 2013. "Assessing the Macroeconomic Impact of Structural Reforms The Case of Italy," IMF Working Papers 13/22, International Monetary Fund.
  12. 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.
  13. Lorenzo E. Bernal-Verdugo & Davide Furceri & Dominique M. Guillaume, 2013. "The Dynamic Effect of Social and Political Instability on Output," IMF Working Papers 13/91, International Monetary Fund.

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