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The Political Economy of Structural Reform: Empirical Evidence from OECD Countries

Listed author(s):
  • Jens Høj
  • Vincenzo Galasso
  • Giuseppe Nicoletti
  • Thai-Thanh Dang

In an empirical investigation, the paper identifies the main political economy drivers of structural policy changes in OECD countries' labour and product markets over the 1985-2003 and 1973-2003 periods respectively. Some of the drivers are beyond the control of governments (i.e., that are exogenous to the political process) while there are others over which governments may have some leverage. The core empirical results, based on a set of policy indicators that cover 21 countries, suggest that the former set of factors has an important influence on the implementation of structural reform, including economic crises, exposure to foreign competition, and government?s duration in office. Nonetheless, the latter set of factors, including budgetary conditions and spillovers across policy areas -- in particular from the product to the labour market -- is also important to both initiate and sustain reforms. Ce document identifie par une analyse empirique les principaux déterminants des changements de politiques structurelles sur les marchés de biens et du travail des pays de l'OCDE sur les périodes 1985- 2003 et 1973-2003, respectivement. Des déterminants hors de contrôle du gouvernement (c'est-à-dire exogènes au processus politique) ont une influence importante sur la mise en oeuvre des réformes structurelles, notamment les crises économiques, l'exposition à la concurrence étrangère et la durée du mandat du gouvernement. Les déterminants sur lesquels le gouvernement peut exercer une influence réelle, notamment les conditions budgétaires et les interdépendances entre domaines de politique économique -- en particulier depuis le marché des biens vers celui du travail -- sont également importants à la fois pour amorcer les réformes et pour les soutenir.

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 501.

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Date of creation: 19 Jul 2006
Handle: RePEc:oec:ecoaaa:501-en
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