The Short-Term Impact of Product Market Reforms

The Short-Term Impact of Product Market Reforms

Author: Peter N. Gal

Publisher: International Monetary Fund

Published: 2016-09-22

Total Pages: 71

ISBN-13: 1475539584

DOWNLOAD EBOOK

This paper analyzes the effects of product market reforms in the short and medium term across 10 regulated industries and 18 advanced economies for the period 1998-2013 using internationally comparable firm-level data based on Orbis. It provides four key insights. First, product market reforms have positive effects on capital, output and employment and their effects increase over time. After two years, they raise capital by 4%, output by 3% and employment by 1.5%. Second, differences in production technology and the nature of product market regulations across sectors generate important differences in the mechanisms through which reforms operate. In network industries, reforms tend to benefit small firms, while the opposite is observed in retail trade. Product market reforms also promote firm entry, particularly those that reduce entry barriers. Third, credit constraints can play an important role in weakening the positive impact of product market reform on investment. Fourth, product market reforms also tend to have positive effects on firms in downstream sectors—both at home and abroad—that make intensive use of intermediate inputs from deregulated sectors.


Book Synopsis The Short-Term Impact of Product Market Reforms by : Peter N. Gal

Download or read book The Short-Term Impact of Product Market Reforms written by Peter N. Gal and published by International Monetary Fund. This book was released on 2016-09-22 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the effects of product market reforms in the short and medium term across 10 regulated industries and 18 advanced economies for the period 1998-2013 using internationally comparable firm-level data based on Orbis. It provides four key insights. First, product market reforms have positive effects on capital, output and employment and their effects increase over time. After two years, they raise capital by 4%, output by 3% and employment by 1.5%. Second, differences in production technology and the nature of product market regulations across sectors generate important differences in the mechanisms through which reforms operate. In network industries, reforms tend to benefit small firms, while the opposite is observed in retail trade. Product market reforms also promote firm entry, particularly those that reduce entry barriers. Third, credit constraints can play an important role in weakening the positive impact of product market reform on investment. Fourth, product market reforms also tend to have positive effects on firms in downstream sectors—both at home and abroad—that make intensive use of intermediate inputs from deregulated sectors.

Product Market Deregulation and Growth

Product Market Deregulation and Growth

Author: Romain Bouis

Publisher: International Monetary Fund

Published: 2016-09-23

Total Pages: 26

ISBN-13: 1475540639

DOWNLOAD EBOOK

The paper investigates the economic effects of major product market reforms in some of the historically most protected non-manufacturing industries. It relies on a unique mapping between new annual data on reform shocks and sector-level outcomes for five network industries (electricity and gas, land transport, air transport, postal services, and telecommunications) in twenty-six countries spanning over three decades. The use of a threedimensional panel and careful instrumentation of reform shocks using external instruments enables us to control for economy-wide macroeconomic shocks and address possible sources of omitted variable bias more broadly. Using a local projection method, we find that major reductions in barriers to entry yield large increases in output and labor productivity over a five-year horizon, concomitant with a relative price decline. By contrast, there is only a weak positive effect on sectoral employment, and investment is essentially unaffected, suggesting that output gains from reform primarily reflect higher total factor productivity. It takes some time for these gains to materialize: effects become statistically significant two to three years after the reform, as prices start dropping, and productivity and output increase significantly. However, there is no evidence of any negative short-term cost from reform, including under weak macroeconomic conditions. These findings provide a clear case for intensifying product market reform efforts in advanced economies at the current juncture of weak growth.


Book Synopsis Product Market Deregulation and Growth by : Romain Bouis

Download or read book Product Market Deregulation and Growth written by Romain Bouis and published by International Monetary Fund. This book was released on 2016-09-23 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper investigates the economic effects of major product market reforms in some of the historically most protected non-manufacturing industries. It relies on a unique mapping between new annual data on reform shocks and sector-level outcomes for five network industries (electricity and gas, land transport, air transport, postal services, and telecommunications) in twenty-six countries spanning over three decades. The use of a threedimensional panel and careful instrumentation of reform shocks using external instruments enables us to control for economy-wide macroeconomic shocks and address possible sources of omitted variable bias more broadly. Using a local projection method, we find that major reductions in barriers to entry yield large increases in output and labor productivity over a five-year horizon, concomitant with a relative price decline. By contrast, there is only a weak positive effect on sectoral employment, and investment is essentially unaffected, suggesting that output gains from reform primarily reflect higher total factor productivity. It takes some time for these gains to materialize: effects become statistically significant two to three years after the reform, as prices start dropping, and productivity and output increase significantly. However, there is no evidence of any negative short-term cost from reform, including under weak macroeconomic conditions. These findings provide a clear case for intensifying product market reform efforts in advanced economies at the current juncture of weak growth.

Labor and Product Market Reforms and External Imbalances: Evidence from Advanced Economies

Labor and Product Market Reforms and External Imbalances: Evidence from Advanced Economies

Author: Mr.Romain A Duval

Publisher: International Monetary Fund

Published: 2021-02-26

Total Pages: 31

ISBN-13: 1513570749

DOWNLOAD EBOOK

We explore the impact of major labor and product market reforms on current account dynamics using a new “narrative” database of major changes in employment protection for regular workers and product market regulation for non-manufacturing industries covering 26 advanced economies over the past four decades. Our main finding is that product market deregulation is associated with a weakening of the current account, while labor market deregulation is associated with an improvement. These effects are transitory and driven by both saving and investment responses. Labor and product market reforms both have a more positive impact on the current account balance when implemented under weak macroeconomic conditions. Our results are broadly consistent with predictions from recent DSGE models with endogenous producer entry and labor market frictions.


Book Synopsis Labor and Product Market Reforms and External Imbalances: Evidence from Advanced Economies by : Mr.Romain A Duval

Download or read book Labor and Product Market Reforms and External Imbalances: Evidence from Advanced Economies written by Mr.Romain A Duval and published by International Monetary Fund. This book was released on 2021-02-26 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the impact of major labor and product market reforms on current account dynamics using a new “narrative” database of major changes in employment protection for regular workers and product market regulation for non-manufacturing industries covering 26 advanced economies over the past four decades. Our main finding is that product market deregulation is associated with a weakening of the current account, while labor market deregulation is associated with an improvement. These effects are transitory and driven by both saving and investment responses. Labor and product market reforms both have a more positive impact on the current account balance when implemented under weak macroeconomic conditions. Our results are broadly consistent with predictions from recent DSGE models with endogenous producer entry and labor market frictions.

When Do Structural Reforms Work? On the Role of the Business Cycle and Macroeconomic Policies

When Do Structural Reforms Work? On the Role of the Business Cycle and Macroeconomic Policies

Author: MissAnna Rose Bordon

Publisher: International Monetary Fund

Published: 2016-03-15

Total Pages: 28

ISBN-13: 1513590243

DOWNLOAD EBOOK

Structural reforms are expected to lift growth and employment, but their effects are surprisingly difficult to pin down empirically. One reason is their potential endogeneity to the economic environment in which they are conducted. For example, the impact of a reform implemented shortly before a cyclical upswing is difficult to distinguish from the recovery itself. Similarly, macroeconomic policies conducted along a structural reform could affect the estimated impact. Exploring various options, this paper develops robust estimates of the impact of labor and product market reforms by using local projection techniques while controlling for endogeneity of reforms and other biases. The results suggest that labor and product market reforms have a lagged but positive impact on employment creation, and the positive effect remains even after controlling for the endogeneity of the decision to reform. Supportive macroeconomic policies are found to increase the effect of labor and product market reforms, consistent with the view that some structural reforms are best initiated in conjunction with supportive fiscal or monetary policy.


Book Synopsis When Do Structural Reforms Work? On the Role of the Business Cycle and Macroeconomic Policies by : MissAnna Rose Bordon

Download or read book When Do Structural Reforms Work? On the Role of the Business Cycle and Macroeconomic Policies written by MissAnna Rose Bordon and published by International Monetary Fund. This book was released on 2016-03-15 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: Structural reforms are expected to lift growth and employment, but their effects are surprisingly difficult to pin down empirically. One reason is their potential endogeneity to the economic environment in which they are conducted. For example, the impact of a reform implemented shortly before a cyclical upswing is difficult to distinguish from the recovery itself. Similarly, macroeconomic policies conducted along a structural reform could affect the estimated impact. Exploring various options, this paper develops robust estimates of the impact of labor and product market reforms by using local projection techniques while controlling for endogeneity of reforms and other biases. The results suggest that labor and product market reforms have a lagged but positive impact on employment creation, and the positive effect remains even after controlling for the endogeneity of the decision to reform. Supportive macroeconomic policies are found to increase the effect of labor and product market reforms, consistent with the view that some structural reforms are best initiated in conjunction with supportive fiscal or monetary policy.

Labor and Product Market Reforms in Advanced Economies

Labor and Product Market Reforms in Advanced Economies

Author: Angana Banerji

Publisher: International Monetary Fund

Published: 2017-03-13

Total Pages: 120

ISBN-13: 1475583974

DOWNLOAD EBOOK

Product and labor market reforms are needed to lift persistently sluggish growth in advanced economies. But reforms have progressed slowly because of concerns about their distributive and short-term economic effects. Our analysis, based on new empirical and numerical analysis and country case-studies shows that most labor and product market reforms can improve public debt dynamics over the medium-term. This because reforms raise output by boosting employment and/or labor productivity. But the effect of some labor market reforms on budgetary outcomes and fiscal sustainability depends critically on business cycle conditions. Our evidence also suggests that some temporary and well-designed up-front fiscal stimulus can help enhance the economic impact of reforms. In the past, countries have used fiscal incentives in the past to facilitate reforms by alleviating transition and social costs. But strong ownership of reforms was crucial for their successful implementation.


Book Synopsis Labor and Product Market Reforms in Advanced Economies by : Angana Banerji

Download or read book Labor and Product Market Reforms in Advanced Economies written by Angana Banerji and published by International Monetary Fund. This book was released on 2017-03-13 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: Product and labor market reforms are needed to lift persistently sluggish growth in advanced economies. But reforms have progressed slowly because of concerns about their distributive and short-term economic effects. Our analysis, based on new empirical and numerical analysis and country case-studies shows that most labor and product market reforms can improve public debt dynamics over the medium-term. This because reforms raise output by boosting employment and/or labor productivity. But the effect of some labor market reforms on budgetary outcomes and fiscal sustainability depends critically on business cycle conditions. Our evidence also suggests that some temporary and well-designed up-front fiscal stimulus can help enhance the economic impact of reforms. In the past, countries have used fiscal incentives in the past to facilitate reforms by alleviating transition and social costs. But strong ownership of reforms was crucial for their successful implementation.

Market Reforms in the Time of Imbalance

Market Reforms in the Time of Imbalance

Author: Matteo Cacciatore

Publisher:

Published: 2016

Total Pages: 41

ISBN-13:

DOWNLOAD EBOOK

We study the consequences of product and labor market reforms in a two-country model with endogenous producer entry and labor market frictions. We focus on the role of business cycle conditions and external constraints at the time of reform implementation (or of a credible commitment to it) in shaping the dynamic effects of such policies. Product market reform is modeled as a reduction in entry costs and takes place in a non-traded sector that produces services used as input in manufacturing production. Labor market reform is modeled as a reduction in firing costs and/or unemployment benefits. We find that business cycle conditions at the time of deregulation significantly affect adjustment. A reduction of firing costs entails larger and more persistent adverse short-run effects on employment and output when implemented in a recession. By contrast, a reduction in unemployment benefits boosts employment and output by more in a recession compared to normal times. The impact of product market reforms is less sensitive to business cycle conditions. Credible announcements about future reforms induce sizable short-run dynamics, regardless of whether the announcement takes place in normal times or during an economic downturn. Whether the immediate effect is expansionary or contractionary varies across reforms. Finally, lack of access to international lending in the wake of reform can amplify the costs of adjustment.


Book Synopsis Market Reforms in the Time of Imbalance by : Matteo Cacciatore

Download or read book Market Reforms in the Time of Imbalance written by Matteo Cacciatore and published by . This book was released on 2016 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the consequences of product and labor market reforms in a two-country model with endogenous producer entry and labor market frictions. We focus on the role of business cycle conditions and external constraints at the time of reform implementation (or of a credible commitment to it) in shaping the dynamic effects of such policies. Product market reform is modeled as a reduction in entry costs and takes place in a non-traded sector that produces services used as input in manufacturing production. Labor market reform is modeled as a reduction in firing costs and/or unemployment benefits. We find that business cycle conditions at the time of deregulation significantly affect adjustment. A reduction of firing costs entails larger and more persistent adverse short-run effects on employment and output when implemented in a recession. By contrast, a reduction in unemployment benefits boosts employment and output by more in a recession compared to normal times. The impact of product market reforms is less sensitive to business cycle conditions. Credible announcements about future reforms induce sizable short-run dynamics, regardless of whether the announcement takes place in normal times or during an economic downturn. Whether the immediate effect is expansionary or contractionary varies across reforms. Finally, lack of access to international lending in the wake of reform can amplify the costs of adjustment.

Product Market Deregulation and Growth

Product Market Deregulation and Growth

Author: Romain Bouis

Publisher:

Published: 2016

Total Pages: 27

ISBN-13:

DOWNLOAD EBOOK

The paper investigates the economic effects of major product market reforms in some of the historically most protected non-manufacturing industries. It relies on a unique mapping between new annual data on reform shocks and sector-level outcomes for five network industries (electricity and gas, land transport, air transport, postal services, and telecommunications) in twenty-six countries spanning over three decades. The use of a three dimensional panel and careful instrumentation of reform shocks using external instruments enables us to control for economy-wide macroeconomic shocks and address possible sourcesof omitted variable bias more broadly. Using a local projection method, we find that major reductions in barriers to entry yield large increases in output and labor productivity over a five-year horizon, concomitant with a relative price decline. By contrast, there is only a weak positive effect on sectoral employment, and investment is essentially unaffected, suggesting that output gains from reform primarily reflect higher total factor productivity. It takes sometime for these gains to materialize: effects become statistically significant two to three years after the reform, as prices start dropping, and productivity and output increase significantly.However, there is no evidence of any negative short-term cost from reform, including underweak macroeconomic conditions. These findings provide a clear case for intensifying product market reform efforts in advanced economies at the current juncture of weak growth.


Book Synopsis Product Market Deregulation and Growth by : Romain Bouis

Download or read book Product Market Deregulation and Growth written by Romain Bouis and published by . This book was released on 2016 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper investigates the economic effects of major product market reforms in some of the historically most protected non-manufacturing industries. It relies on a unique mapping between new annual data on reform shocks and sector-level outcomes for five network industries (electricity and gas, land transport, air transport, postal services, and telecommunications) in twenty-six countries spanning over three decades. The use of a three dimensional panel and careful instrumentation of reform shocks using external instruments enables us to control for economy-wide macroeconomic shocks and address possible sourcesof omitted variable bias more broadly. Using a local projection method, we find that major reductions in barriers to entry yield large increases in output and labor productivity over a five-year horizon, concomitant with a relative price decline. By contrast, there is only a weak positive effect on sectoral employment, and investment is essentially unaffected, suggesting that output gains from reform primarily reflect higher total factor productivity. It takes sometime for these gains to materialize: effects become statistically significant two to three years after the reform, as prices start dropping, and productivity and output increase significantly.However, there is no evidence of any negative short-term cost from reform, including underweak macroeconomic conditions. These findings provide a clear case for intensifying product market reform efforts in advanced economies at the current juncture of weak growth.

Macroeconomic Impact of Product and Labor Market Reforms on Informality and Unemployment in India

Macroeconomic Impact of Product and Labor Market Reforms on Informality and Unemployment in India

Author: Rahul Anand

Publisher: International Monetary Fund

Published: 2016-03-07

Total Pages: 61

ISBN-13: 1513557874

DOWNLOAD EBOOK

This paper investigates the implications of lowering formal regulations in labor and product markets on informality and macroeconomic outcomes in India. We estimate a DSGE model with an informal sector, and rigidities in the formal labor and product markets. Along with increasing GDP and employment, deregulation also leads to lower informality and greater product market competition. Slow reallocation of resources between the formal and informal sectors leads to some adverse impacts in the short run that can be minimized by implementing a combined package of reforms. These impacts are shown to be greater in an economy with a larger informal sector.


Book Synopsis Macroeconomic Impact of Product and Labor Market Reforms on Informality and Unemployment in India by : Rahul Anand

Download or read book Macroeconomic Impact of Product and Labor Market Reforms on Informality and Unemployment in India written by Rahul Anand and published by International Monetary Fund. This book was released on 2016-03-07 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the implications of lowering formal regulations in labor and product markets on informality and macroeconomic outcomes in India. We estimate a DSGE model with an informal sector, and rigidities in the formal labor and product markets. Along with increasing GDP and employment, deregulation also leads to lower informality and greater product market competition. Slow reallocation of resources between the formal and informal sectors leads to some adverse impacts in the short run that can be minimized by implementing a combined package of reforms. These impacts are shown to be greater in an economy with a larger informal sector.

Structural Reforms

Structural Reforms

Author: Jakob de Haan

Publisher: Springer

Published: 2018-03-22

Total Pages: 284

ISBN-13: 3319744003

DOWNLOAD EBOOK

This book presents a selection of contributions on the timely topic of structural reforms in Western economies, written by experts from central banks, the International Monetary Fund, and leading universities. It includes latest research on the impacts of structural reforms on the market economy, especially on the labor market, and investigates the results of collective bargaining in theory and practice. The book also comprises case studies of structural reforms. A literature survey on the topic serves as a valuable source for further research. The book is written by and targeted at both academics and policy makers.


Book Synopsis Structural Reforms by : Jakob de Haan

Download or read book Structural Reforms written by Jakob de Haan and published by Springer. This book was released on 2018-03-22 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents a selection of contributions on the timely topic of structural reforms in Western economies, written by experts from central banks, the International Monetary Fund, and leading universities. It includes latest research on the impacts of structural reforms on the market economy, especially on the labor market, and investigates the results of collective bargaining in theory and practice. The book also comprises case studies of structural reforms. A literature survey on the topic serves as a valuable source for further research. The book is written by and targeted at both academics and policy makers.

On the Impact of Structural Reforms on Output and Employment

On the Impact of Structural Reforms on Output and Employment

Author: Luiza Antoun de Almeida

Publisher: International Monetary Fund

Published: 2018-04-06

Total Pages: 36

ISBN-13: 1484351770

DOWNLOAD EBOOK

This paper analyzes the effects of selected structural reforms on output and employment in the short and medium term. It uses a comprehensive cross-country firm-level dataset covering both advanced and emerging market economies over the period 2003-2014. In line with previous studies, it finds that structural reforms have in general a positive impact on output and employment in the medium term. Furthermore, the paper also assesses whether the impact of structural reforms varies with firm-specific characteristics, such as size, leverage, profitability, and sector. We find evidence that firm characteristics do influence the effectiveness of structural reforms. These findings have relevant policy implications as they help policymakers tailor the design of structural reforms to maximize their payoffs, taking into account their heterogeneous impact on firms.


Book Synopsis On the Impact of Structural Reforms on Output and Employment by : Luiza Antoun de Almeida

Download or read book On the Impact of Structural Reforms on Output and Employment written by Luiza Antoun de Almeida and published by International Monetary Fund. This book was released on 2018-04-06 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the effects of selected structural reforms on output and employment in the short and medium term. It uses a comprehensive cross-country firm-level dataset covering both advanced and emerging market economies over the period 2003-2014. In line with previous studies, it finds that structural reforms have in general a positive impact on output and employment in the medium term. Furthermore, the paper also assesses whether the impact of structural reforms varies with firm-specific characteristics, such as size, leverage, profitability, and sector. We find evidence that firm characteristics do influence the effectiveness of structural reforms. These findings have relevant policy implications as they help policymakers tailor the design of structural reforms to maximize their payoffs, taking into account their heterogeneous impact on firms.