Job Creation in Spain: Productivity Growth, Labour Market Reforms or both?
The benefits implied by changing the growth model are at the heart of the heated political and economic debate in Spain. Increases in productivity and the reallocation of employment towards more innovative sectors are defended as the panacea for most of the ills afflicting the Spanish economy. In this paper we use a DSGE model with price rigidities, and labour market search frictions a la Mortensen-Pissarides, to assess the effects of the change in the growth model on unemployment. In so doing, we assume that the vigorous demand shock which has been mostly responsible for recent economic growth in Spain will be successfully substituted by a productivity shock as the main driver of Spain‘s economic growth in the future. So we assume that we actually succeed in the so called "change in the growth model". We show that whatever the benefits that this change might bring to the Spanish economy, the time span needed to bring the unemployment rate down to the European average actually increases. We then analyze the impact of several reforms in the labour market and evaluate their interaction with the new growth model. We conclude that changes in the economic structure do not make labour reforms any less necessary, but rather the opposite if we want to shorten employment recovery significantly.
|Date of creation:||Nov 2009|
|Contact details of provider:|| Phone: +34 964 728590|
Fax: +34 964 728591
Web page: http://iei.uv.es
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Huang, Ho-Chuan (River) & Lin, Shu-Chin, 2008. "Smooth-time-varying Okun's coefficients," Economic Modelling, Elsevier, vol. 25(2), pages 363-375, March.
- Jose Emilio Boscá & Rafael Domenech & Javier Ferri, 2008.
"Tax Reforms and Labour-market Performance: An Evaluation for Spain using REMS,"
0804, International Economics Institute, University of Valencia.
- JosÃ© Emilio BoscÃ¡ & Rafael Domenech & Javier Ferri, 2009. "Tax reforms and labour-market performance: An evaluation for Spain using REMS," Working Papers 0910, BBVA Bank, Economic Research Department.
- J. Boscá & A. Díaz & R. Doménech & J. Ferri & E. Pérez & L. Puch, 2010.
"A rational expectations model for simulation and policy evaluation of the Spanish economy,"
SERIEs: Journal of the Spanish Economic Association,
Springer;Spanish Economic Association, vol. 1(1), pages 135-169, March.
- J.E. Boscá & A. Díaz & R. Doménech & J. Ferri & E. Pérez & L. Puch, 2007. "A Rational Expectations Model for Simulation and Policy Evaluation of the Spanish Economy," Working Papers 0706, International Economics Institute, University of Valencia.
- Ian Dew-Becker & Robert J. Gordon, 2008.
"The Role of Labor Market Changes in the Slowdown of European Productivity Growth,"
NBER Working Papers
13840, National Bureau of Economic Research, Inc.
- Dew-Becker, Ian & Gordon, Robert J, 2008. "The Role of Labour Market Changes in the Slowdown of European Productivity Growth," CEPR Discussion Papers 6722, C.E.P.R. Discussion Papers.
- Pietro Garibaldi & Paolo Mauro, 2002. "Anatomy of employment growth," Economic Policy, CEPR;CES;MSH, vol. 17(34), pages 67-114, April.
- Diego Romero-Avila & Carlos Usabiaga, 2007. "Unit root tests and persistence of unemployment: Spain vs. the United States," Applied Economics Letters, Taylor & Francis Journals, vol. 14(6), pages 457-461.