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Can structural reforms unleash private investment?

Author

Listed:
  • Mavrogiannis, Christos
  • Zorell, Nico
  • Zwick, Christoph

Abstract

This paper examines the impact of labour and product market reforms on private investment across 26 advanced economies from 1975 to 2020. To this end, we combine a narrative database on major structural reforms with local projections and augmented inverse probability weighting. We find that a major labour market reform typically increases the level of real private investment by 5% cumulatively within six years, while a major product market reform yields an impact of 3%. Structural reforms are particularly effective in stimulating private investment when the private sector has access to ample external finance and the rule of law is strong. Overall, our findings point to an important role for structural reforms in boosting private investment and thus long-term growth prospects in advanced economies. JEL Classification: E22, O43, L51

Suggested Citation

  • Mavrogiannis, Christos & Zorell, Nico & Zwick, Christoph, 2026. "Can structural reforms unleash private investment?," Working Paper Series 3273, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20263273
    Note: 1641505
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    Keywords

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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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