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The Distributional Impact of Structural Reforms

Author

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  • Orsetta Causa

    (OECD)

  • Mikkel Hermansen

    (OECD)

  • Nicolas Ruiz

    (OECD)

Abstract

In a majority of OECD countries, GDP growth over the past three decades has been associated with growing income disparities. To shed some lights on the potential sources of trade-offs between growth and equity, this paper investigates the long-run impact of structural reforms on household incomes across the distribution, hence on income inequality. The paper builds on a macro-micro approach by combining recent macro-level estimates of the impact of structural reforms on macroeconomic growth with micro-level estimates of the impact of structural reforms on household incomes across the income distribution. It considers the sources of macroeconomic growth, by decomposing growth in GDP per capita into growth in labour utilisation and labour productivity. This allows for shedding light on the mechanisms through which growth and its drivers, including policy drivers, benefit household incomes at different points of the income distribution. Most structural reforms are found to have little impact on income inequality when the latter is assessed through measures that emphasise the middle class. By contrast, a higher number of structural reforms, in particular social protection reforms, are found to have an impact on income inequality and thus may raise tradeoffs and synergies between growth equity objectives when inequality is assessed through measures that emphasise relatively more incomes among the poor. This corresponds to higher degrees of inequality aversion. L'impact distributionnel des politiques structurelles Dans la majorité des pays de l'OCDE la croissance du PIB au cours des trois dernières décennies a été associée à des disparités croissantes de revenus. Afin de comprendre le lien entre ces deux phénomènes, cet article étudie l'impact de long terme des réformes structurelles sur la distribution des revenus. Le cadre empirique proposé est une approche macro-micro, combinant des estimations récentes au niveau macro de l'impact des réformes structurelles sur la croissance macroéconomique, avec des estimations au niveau micro de l'impact des réformes structurelles sur les revenus des ménages le long de la distribution. Les sources de la croissance sont aussi décomposées, entre travail et productivité, afin d’illustrer par quels mécanismes la croissance et les politiques structurelles bénéficient aux ménages. La plupart des réformes structurelles se trouvent avoir peu d'impact sur les inégalités de revenu lorsque le focus est sur la classe moyenne. En revanche, un nombre plus élevé de réformes structurelles, en particulier les réformes de la protection sociale, se trouvent avoir un impact significatif lorsque le focus est sur les segments les plus pauvres de la distribution.

Suggested Citation

  • Orsetta Causa & Mikkel Hermansen & Nicolas Ruiz, 2016. "The Distributional Impact of Structural Reforms," OECD Economics Department Working Papers 1342, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1342-en
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    File URL: http://dx.doi.org/10.1787/5jln041nkpwc-en
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    References listed on IDEAS

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    1. repec:euf:pfremu:pfr-2017-01 is not listed on IDEAS
    2. Oecd, 2017. "Making trade work for all," OECD Trade Policy Papers 202, OECD Publishing.

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    Keywords

    growth; inequality; structural policies;

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