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Raising Potential Growth After the Crisis: A Quantitative Assessment of the Potential Gains from Various Structural Reforms in the OECD Area and Beyond

  • Romain Bouis
  • Romain Duval

This paper provides an illustrative assessment of the impacts on potential GDP over a 5 to 10-year horizon of structural reform scenarios in the areas of product and labour markets, relying on existing OECD empirical studies. Results of simulations suggest that a gradual alignment of product market regulations to best practice in a broad range of non-manufacturing sectors could boost aggregate labour productivity levels by several per cent over the next decade in many OECD countries, and by over five per cent across most of continental Europe, as well as for the BRIICS. Relaxation of job protection legislation could also raise productivity growth for a while in many OECD and non-OECD G20 countries, although the effects are estimated to be smaller than those from product market reforms. In a scenario under which they would be phased in relatively quickly, labour market reforms in the areas of unemployment benefit systems, activation policies, labour taxes and pension systems could raise employment rates by several percentage points in a number of OECD countries over a 10-year horizon. Large continental European countries would have the largest benefits to reap from reforms. The overall potential GDP gain for the average OECD country from undertaking the full range of reforms considered here might come close to 10% at a 10-year horizon, indicating the presence of ample room for structural reforms to offset the permanent GDP losses from the recent crisis. Augmenter la croissance potentielle après la crise : une évaluation quantitative des gains potentiels de différentes réformes structurelles au sein de l'OCDE et au-delà Cet article fourni une évaluation illustrative des impacts sur le PIB potentiel à des horizons de 5 et 10 ans de scénarios de réformes structurelles dans les domaines des marchés des produits et du travail, à partir de travaux empiriques de l’OCDE. Les résultats des simulations suggèrent qu’un alignement graduel des réglementations du marché des produits dans un large ensemble de secteurs non manufacturiers aux meilleurs pratiques pourrait augmenter la productivité agrégée du travail de plusieurs pour cent au cours de la prochaine décennie dans plusieurs pays de l’OCDE, et de plus de cinq pour cent au sein de la plupart des pays d’Europe continentale, ainsi que dans les BRIICS. Un relâchement de la législation sur la protection de l’emploi pourrait augmenter la croissance de la productivité d’un montant non négligeable dans plusieurs pays de l’OCDE et pays non OCDE membres du G20, bien que les effets estimés soient plus faibles que ceux attendus de réformes du marché des produits. Dans un scénario dans lequel elles seraient mises en oeuvre assez rapidement, les réformes du marché du travail dans les domaines des systèmes d’indemnisation chômage, de politiques d’activation, de fiscalité du travail et de systèmes de retraite pourraient augmenter les taux d’emploi de plusieurs points de pourcentage dans plusieurs pays de l’OCDE à un horizon de 10 ans sous un scénario de mise en oeuvre rapide. Le gain en PIB potentiel pour le pays moyen de l’OCDE d’une mise en oeuvre de l’ensemble des réformes considérées ici pourrait approcher 10 % à un horizon de 10 ans, indiquant la présence de gains substantiels liés aux réformes structurelles susceptibles de compenser les pertes définitives en PIB consécutives à la crise récente.

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 835.

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Date of creation: 18 Jan 2011
Date of revision:
Handle: RePEc:oec:ecoaaa:835-en
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  1. Renaud Bourlès & Gilbert Cette, 2005. "Une comparaison des niveaux de productivité structurels des grands pays industrialisés," Revue économique de l'OCDE, OECD Publishing, vol. 2005(2), pages 83-117.
  2. Bourlès, Renaud & Cette, Gilbert, 2005. "A comparison of structural productivity levels in the major industrialised countries," MPRA Paper 7330, University Library of Munich, Germany.
  3. Andrea Bassanini & Romain Duval, 2009. "Unemployment, institutions, and reform complementarities: re-assessing the aggregate evidence for OECD countries," Oxford Review of Economic Policy, Oxford University Press, vol. 25(1), pages 40-59, Spring.
  4. Bourlès, R. & Cette, G. & Lopez, J. & Mairesse, J. & Nicoletti, G., 2010. "Do product market regulations in upstream sectors curb productivity growth? Panel data evidence for OECD countries," Working papers 283, Banque de France.
  5. Davide Furceri & Annabelle Mourougane, 2012. "How Do Institutions Affect Structural Unemployment in Times of Crises?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(4), pages 393-419, September.
  6. Davide Furceri & Annabelle Mourougane, 2009. "The Effect of Financial Crises on Potential Output: New Empirical Evidence from OECD Countries," OECD Economics Department Working Papers 699, OECD Publishing.
  7. Annabelle Mourougane & Lukas Vogel, 2008. "Speed of Adjustment to Selected Labour Market and Tax Reforms," OECD Economics Department Working Papers 647, OECD Publishing.
  8. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "From Financial Crash to Debt Crisis," NBER Working Papers 15795, National Bureau of Economic Research, Inc.
  9. Romain Duval, 2003. "The Retirement Effects of Old-Age Pension and Early Retirement Schemes in OECD Countries," OECD Economics Department Working Papers 370, OECD Publishing.
  10. Valerie Cerra & Sweta C. Saxena, 2005. "Growth Dynamics: The Myth of Economic Recovery," Macroeconomics 0508008, EconWPA.
  11. Renaud Bourlès & Gilbert Cette & Jimmy Lopez & Jaques Mairesse & Giuseppe Nicoletti, 2010. "The Impact on Growth of Easing Regulation in Upstream Sectors," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 8(3), pages 8-12, October.
  12. Luiz de Mello & Pier Carlo Padoan, 2010. "Promoting Potential Growth: The Role of Structural Reform," OECD Economics Department Working Papers 793, OECD Publishing.
  13. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Economics Department Working Papers 486, OECD Publishing.
  14. Sebastian Barnes & Romain Bouis & Philippe Briard & Sean Dougherty & Mehmet Eris, 2013. "The GDP Impact of Reform: A Simple Simulation Framework," OECD Economics Department Working Papers 834, OECD Publishing.
  15. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries," Economic Policy, CEPR;CES;MSH, vol. 24, pages 349-402, 04.
  16. Danielle Venn, 2009. "Legislation, Collective Bargaining and Enforcement: Updating the OECD Employment Protection Indicators," OECD Social, Employment and Migration Working Papers 89, OECD Publishing.
  17. Paul Conway & Donato de Rosa & Giuseppe Nicoletti & Faye Steiner, 2006. "Product market regulation and productivity convergence," OECD Economic Studies, OECD Publishing, vol. 2006(2), pages 39-76.
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