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Policy lessons from labor market reforms during crisis: Success and failure of the Greek bailout programs

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  • Gatopoulos, Georgios
  • Louka, Alexandros
  • Polycarpou, Ioannis
  • Vettas, Nikolaos

Abstract

We explore the implications from one of the most radical packages of labor policy measures ever implemented, during the recent economic adjustment program in Greece. Within one year, large scale interventions touched upon the minimum wage, collective bargaining, employment protection and flexible forms of employment. Using a macro-wide generalized synthetic control model to evaluate the impact of the reforms, we identify important policy lessons. In the absence of exchange rate as a policy instrument, multifaceted labor policy interventions improve cost competitiveness and flexibility in the labor market, absorbing part of the crisis shock on employment volume. Nonetheless, amid intense fiscal constraints, reforms have side effects on participation rate and income inequality, unless accompanied with measures such as lower tax wedge and complementary product market reforms.

Suggested Citation

  • Gatopoulos, Georgios & Louka, Alexandros & Polycarpou, Ioannis & Vettas, Nikolaos, 2026. "Policy lessons from labor market reforms during crisis: Success and failure of the Greek bailout programs," Journal of Policy Modeling, Elsevier, vol. 48(4).
    • Handle: RePEc:eee:jpolmo:v:48:y:2026:i:4:s0161893826000037
    DOI: 10.1016/j.jpolmod.2026.01.001
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