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The Costs of Flexibility-Enhancing Structural Reforms: A Literature Review

Author

Listed:
  • Tito Boeri

    (Bocconi University)

  • Pierre Cahuc

    (École Polytechnique)

  • André Zylberberg

    (Centre national de la recherche scientifique)

Abstract

This survey highlights the key results of the empirical literature concerning the costs of flexibility enhancing reforms in product and labour markets. The documented costs include reduced employment, loss of government revenue, undesirable distributional consequences and political instability. The literature suggests that: i) once implemented, product and labour market reforms affect prices and quantities quite rapidly; ii) there are no major differences between the overall effects in the short and long run; iii) the costs of reforms are very much related to interactions with other policies and institutions; and iv) the costs of reforms change over the business cycle. Les Coûts des Réformes de Flexibilité : Revue de Littérature Cette revue de la littérature met en relief les principaux résultats empiriques sur les coûts des réformes qui améliorent la flexibilité des marchés du travail et des biens. Ces coûts se comptabilisent en termes de pertes d’emplois et de revenus fiscaux, mais tiennent aussi compte d’éventuels effets redistributifs et de l’instabilité politique. Cette revue de la littérature montre que : i) les réformes des marchés du travail et des biens agissent rapidement sur les prix et les quantités dès qu’elles sont mises en oeuvre ; ii) il n’y a pas de différences majeures dans la nature des effets de long-terme et de court-terme ; iii) les coûts des réformes dépendent fortement des interactions existantes entre les diverses politiques publiques et institutions façonnant les marchés, et iv) : les coûts des réformes ne sont pas les mêmes selon les phases du cycle des affaires.

Suggested Citation

  • Tito Boeri & Pierre Cahuc & André Zylberberg, 2015. "The Costs of Flexibility-Enhancing Structural Reforms: A Literature Review," OECD Economics Department Working Papers 1264, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1264-en
    DOI: 10.1787/5jrs558c5r5f-en
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    Citations

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    Cited by:

    1. Francesco Zanetti & Konstantinos Theodoridis, 2018. "State Dependence in Labor Market Fluctuations: Evidence, Theory, and Policy Implications," Economics Series Working Papers 856, University of Oxford, Department of Economics.
    2. Landaud, Fanny, 2021. "From employment to engagement? Stable jobs, temporary jobs, and cohabiting relationships," Labour Economics, Elsevier, vol. 73(C).
    3. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2019. "Employment Protection and Firm-provided Training: Quasi-experimental Evidence from a Labour Market Reform," GLO Discussion Paper Series 368, Global Labor Organization (GLO).
    4. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2021. "Employment protection and firm-provided training in dual labour markets," Labour Economics, Elsevier, vol. 69(C).
    5. Jan J. Rutkowski & Claudia Oriolo & Iva Tomic & Sanja Madzarevic-Sujster, 2016. "Addressing Labor Market Duality in Croatia," World Bank Publications - Reports 33399, The World Bank Group.
    6. Aumond, Romain & Di Tommaso, Valerio & Rünstler, Gerhard, 2022. "A narrative database of labour market reforms in euro area economies," Working Paper Series 2657, European Central Bank.
    7. 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.
    8. Anderton, Robert & Di Lupidio, Benedetta, 2019. "Effects of labour and product market regulation on worker flows: evidence for the euro area using micro data," Working Paper Series 2312, European Central Bank.
    9. Thommen, Yann, 2022. "Reforms of collective bargaining institutions in European Union countries: Bad timing, bad outcomes?," European Journal of Political Economy, Elsevier, vol. 71(C).
    10. Andrea Bassanini & Federico Cingano, 2019. "Before It Gets Better: The Short-Term Employment Costs of Regulatory Reforms," ILR Review, Cornell University, ILR School, vol. 72(1), pages 127-157, January.
    11. Arestis, Philip & Ferreiro, Jesus & Gómez, Carmen, 2020. "Quality of employment and employment protection. Effects of employment protection on temporary and permanent employment," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 180-188.
    12. Rünstler, Gerhard, 2021. "The macroeconomic impact of euro area labour market reforms: evidence from a narrative panel VAR," Working Paper Series 2592, European Central Bank.
    13. Landaud, Fanny, 2019. "From Employment to Engagement? Stable Jobs, Temporary Jobs, and Cohabiting Relationships," Discussion Paper Series in Economics 10/2019, Norwegian School of Economics, Department of Economics, revised 30 Apr 2019.
    14. García-Vega, María & Kneller, Richard & Stiebale, Joel, 2021. "Labor market reform and innovation: Evidence from Spain," Research Policy, Elsevier, vol. 50(5).
    15. Eichhorst, Werner & Kalleberg, Arne & Portela de Souza, André & Visser, Jelle, 2019. "Designing Good Labour Market Institutions: How to Reconcile Flexibility, Productivity and Security?," IZA Discussion Papers 12482, Institute of Labor Economics (IZA).
    16. Jesus Ferreiro & Carmen Gomez, 2020. "Employment protection and labor market results in Europe," Journal of Evolutionary Economics, Springer, vol. 30(2), pages 401-449, April.
    17. Boeri, Tito & Jimeno, Juan F., 2016. "Learning from the Great Divergence in unemployment in Europe during the crisis," Labour Economics, Elsevier, vol. 41(C), pages 32-46.
    18. Céline Piton, 2018. "The unemployment impact of product and labour market regulation: Evidence from European countries," Working Paper Research 343, National Bank of Belgium.
    19. Michał Pilc, 2018. "Should the Government Provide Jobs for Everyone? Societal Expectations and Their Impact on Labour Market Institutions and Outcomes," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 4, pages 179-210.
    20. Céline Piton, 2018. "The unemployment impact of product and labour market regulation: Evidence from European countries," Working Paper Research 343, National Bank of Belgium.

    More about this item

    Keywords

    flexibility; flexibilité; long run; long terme; réforme structurelle; structural reforms;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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