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Impact of labour market reforms on economic activity in European Union: short term costs and long term benefits

Author

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  • Martina Basarac Sertic

    (Croatian Academy of Sciences and Arts, Zagreb, Croatia)

  • Anita Ceh Casni

    (University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia)

  • Valentina Vuckovic

    (University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia)

Abstract

The main objective of this paper was to quantify the long- and short-term impacts of labour market reforms on economic activity in EU countries, including Croatia. Therefore, we derived a model using the pooled mean group estimator (PMG) for the period from 2000 to 2011. Before performing dynamic panel analysis based on the PMG estimator, the unit root and panel cointegration tests were performed. According to the results, labour market reforms have positive and statistically significant long-term impact on GDP per capita. On the other hand, labour market reforms also have a statistically significant and negative effect on GDP per capita in the short-run. Control variables (industrial production and the rate of the active population) also have significant impacts on GDP per capita. In addition to econometric analysis, we also present an overview of empirical and theoretical research on labour market reforms in developed, developing and transition countries.

Suggested Citation

  • Martina Basarac Sertic & Anita Ceh Casni & Valentina Vuckovic, 2015. "Impact of labour market reforms on economic activity in European Union: short term costs and long term benefits," Financial Theory and Practice, Institute of Public Finance, vol. 39(1), pages 83-107.
    • Handle: RePEc:ipf:finteo:v:39:y:2015:i:1:p:83-107
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    References listed on IDEAS

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    Cited by:

    1. Dragos Adascalitei & Clemente Pignatti Morano, 2016. "Drivers and effects of labour market reforms: Evidence from a novel policy compendium," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-32, December.

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    More about this item

    Keywords

    labour market reforms; European Union; economic crisis; PMG estimator;
    All these keywords.

    JEL classification:

    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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