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Improving Competition in the Non-Tradable Goods and Labour Markets: The Portuguese Case

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  • Vanda Almeida
  • Gabriela Lopes de Castro
  • Ricardo Mourinho Félix

Abstract

This study assesses the macroeconomic impacts of increasing competition in the non-tradable goods and labour markets in Portugal. We lean on evidence that the maintenance of low competition in these markets may have contributed to the recent poor performance of the Portuguese economy. The analysis is performed using PESSOA, a dynamic general equilibrium model for a small-open economy integrated in a monetary union, featuring Blanchard-Yaari households, a multi-sectoral production structure and a number of nominal and real rigidities. We conclude that measures aimed at increasing competition in the Portuguese non-tradable goods and labour markets could induce important international competitiveness gains and be valuable instruments in promoting necessary adjustments within the monetary union frame-work. However, in the short run, real interest rates are likely to increase temporarily, driving consumption and output temporarily downwards.

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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w200816.

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Date of creation: 2008
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Handle: RePEc:ptu:wpaper:w200816

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The Lost Decade through Pessoaâ??s bespectacled eyes
    by Vasco M Carvalho in The Portuguese Economy on 2010-03-09 07:50:00
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Cited by:
  1. Vanda Almeida & Gabriela Lopes de Castro & Ricardo Mourinho Félix & José R. Maria, 2011. "Fiscal consolidation in a small euro area economy," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  2. Gabriela Lopes de Castro & Ricardo Mourinho Félix & Paulo Júlio & José R. Maria, 2013. "Fiscal multipliers in a small euro area economy: How big can they get in crisis times?," Working Papers w201311, Banco de Portugal, Economics and Research Department.
  3. Schwarzmüller, Tim & Stähler, Nikolai, 2011. "Reforming the labor market and improving competitiveness: An analysis for Spain using FiMod," Discussion Paper Series 1: Economic Studies 2011,28, Deutsche Bundesbank, Research Centre.
  4. Gabriela Lopes de Castro & José R. Maria & Ricardo Mourinho Félix & Cláudia Braz, 2013. "Ageing and fiscal sustainability in a small euro area economy," Working Papers w201304, Banco de Portugal, Economics and Research Department.
  5. A team of the Working Group on Econometric Modelling of the European System of Central Banks, 2012. "Competitiveness and external imbalances within the euro area," Occasional Paper Series 139, European Central Bank.
  6. Janos Varga & Werner Roeger & Jan in’t Veld, 2014. "Growth effects of structural reforms in Southern Europe: the case of Greece, Italy, Spain and Portugal," Empirica, Springer, vol. 41(2), pages 323-363, May.
  7. Marto, Ricardo, 2013. "Assessing the Impacts of Non-Ricardian Households in an Estimated New Keynesian DSGE Model," MPRA Paper 55647, University Library of Munich, Germany.
  8. Isabel Horta Correia, 2011. "Fiscal devaluation," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.

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