Working Paper: CEPR ID: DP3646
Authors: Gilles Saint-Paul
Abstract: In this Paper, I analyse the pros and cons of implementing structural reforms of the labour market in booms versus recessions, in light of considerations of social efficiency, political viability, and macroeconomic fine-tuning. While the optimal timing of a reform depends on the relative importance of several conflicting effects, it seems clear that a reform should be accompanied by an expansionary macroeconomic policy. This makes structural reform more problematic in the context of the European Monetary Union.
Keywords: employment protection; firing costs; labour market reforms; monetary union; political economy; unemployment
JEL Codes: E32; E52; E61; J60
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| timing of structural reforms (E69) | social welfare (I38) |
| reductions in employment protection (J63) | job creation (J68) |
| reductions in employment protection (J63) | overall unemployment levels (J64) |
| political support for reforms (E69) | exposure to job loss (J63) |
| clarity about job productivity (J29) | political support for reforms (E69) |
| structural reforms (E69) | macroeconomic policy (E60) |
| expansionary policies (E63) | deflationary impacts of reforms (E69) |