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Labor and Product Market Deregulation; Partial, Sequential, or Simultaneous Reform?

  • Helge Berger
  • Stephan Danninger

This study explores the effects of labor and product market deregulation on employment growth. Our empirical results, based on an OECD country panel from 1990-2004, suggest that lower levels of product and labor market regulation foster employment growth, including through sizable interaction effects. Based on these findings, the paper develops a theoretical framework for evaluating deregulation strategies in the presence of reform costs. Optimal deregulation takes various forms depending on the deregulation costs, the strength of reform interactions, and the perspective of the policymaker. Unless deregulation costs are very asymmetric across markets, optimal deregulation requires some form of coordination.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/227.

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Length: 35
Date of creation: 01 Dec 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/227
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  1. Monique Ebell & Christian Haefke, 2002. "Product Market Deregulation and Labor Market Outcomes," Working Papers 02.08, Swiss National Bank, Study Center Gerzensee.
  2. Adriana D. Kugler & Giovanni Pica, 2006. "The Effects of Employment Protection and Product Market Regulations on the Italian Labour Market," Chapters, in: Labour Market Adjustments in Europe, chapter 4 Edward Elgar.
  3. Stephen Nickell, 2003. "Labour Market Institutions and Unemployment in OECD Countries," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 1(2), pages 13-26, October.
  4. Michael Fertig & Jochen Kluve, 2004. "A Conceptual Framework for the Evaluation of Comprehensive Labor Market Policy Reforms in Germany," RWI Discussion Papers 0013, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
  5. Nicoletti, Giuseppe & Scarpetta, Stefano, 2003. "Regulation, productivity, and growth : OECD evidence," Policy Research Working Paper Series 2944, The World Bank.
  6. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
  7. Stephen Coate & Stephen Morris, . ""Policy Persistence ''," CARESS Working Papres 95-19, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  8. Winston, Clifford, 1993. "Economic Deregulation: Days of Reckoning for Microeconomists," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1263-89, September.
  9. Alfred Boss & Thomas Elendner, 2005. "Incentives to Work: The Case of Germany," Kiel Working Papers 1237, Kiel Institute for the World Economy.
  10. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
  11. Francesco Daveri & Guido Tabellini, . "Unemployment, Growth and Taxation in Industrial Countries," Working Papers 122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  12. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2002. "Regulation and Investment," Boston College Working Papers in Economics 549, Boston College Department of Economics.
  13. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
  14. Olivier Blanchard, 2004. "The Economic Future of Europe," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 3-26, Fall.
  15. Marcello M. Estevão, 2005. "Product Market Regulation and the Benefits of Wage Moderation," IMF Working Papers 05/191, International Monetary Fund.
  16. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  17. Koeniger, Winfried & Vindigni, Andrea, 2003. "Employment Protection and Product Market Regulation," IZA Discussion Papers 880, Institute for the Study of Labor (IZA).
  18. Potters, J.J.M. & van Winden, F.A.A.M., 1996. "Models of interest groups : Four different approaches," Other publications TiSEM 989c7739-9342-4fdc-82ee-e, Tilburg University, School of Economics and Management.
  19. Kugler, Adriana D. & Pica, Giovanni, 2004. "Effects of Employment Protection and Product Market Regulations on the Italian Labour Market," CEPR Discussion Papers 4216, C.E.P.R. Discussion Papers.
  20. Olivier Blanchard & Francesco Giavazzi, 2001. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," NBER Working Papers 8120, National Bureau of Economic Research, Inc.
  21. David Coe & Dennis Snower, 1996. "Policy Complementarities: The Case for Fundamental Labor Market Reform," Archive Discussion Papers 9625, Birkbeck, Department of Economics, Mathematics & Statistics.
  22. Dewatripont, Mathias & Roland, Gerard, 1995. "The Design of Reform Packages under Uncertainty," American Economic Review, American Economic Association, vol. 85(5), pages 1207-23, December.
  23. Julián Messina, 2005. "Institutions and Service Employment: A Panel Study for OECD Countries ," LABOUR, CEIS, vol. 19(2), pages 343-372, 06.
  24. Heikki Kauppi & Erkki Koskela & Rune Stenbacka, 2004. "Equilibrium Unemployment and Capital Intensity Under Product and Labor Market Imperfections," CESifo Working Paper Series 1343, CESifo Group Munich.
  25. Michael Burda, 2000. "Product Market Regulation and Labor Market Outcomes: How can Deregulation Create Jobs?," CESifo Working Paper Series 230, CESifo Group Munich.
  26. Bertola, Giuseppe & Blau, Francine D & Kahn, Lawrence, 2001. "Comparative Analysis of Labour Market Outcomes: Lessons for the US from International Long-Run Evidence," CEPR Discussion Papers 3023, C.E.P.R. Discussion Papers.
  27. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  28. repec:reg:rpubli:74 is not listed on IDEAS
  29. Sébastien Jean & Giuseppe Nicoletti, 2004. "Regulation and Wage Premia," Working Papers 2004-12, CEPII research center.
  30. Lawrence Kahn, 2003. "Labour Market Institutions and Unemployment in OECD Countries," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 1(4), pages 25-32, October.
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