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Structural labour market reforms in the EU-15: Single-country vs. coordinated counterfactuals

Povilas Lastauskas and Julius Stakenas

Structural Change and Economic Dynamics, 2018, vol. 44, issue C, 88-99

Abstract: Recent turbulent times have spurred a response by policy-makers to engage in a number of labour market reforms to enhance economic resilience and flexibility. Amid discussions about the most efficient ways to conduct such reforms, whether individually or simultaneously, we still lack evidence on the cross-country interactions and international interdependencies that may strengthen or weaken economic responses within an economic union. This paper deals with three policy tools – unemployment benefits, activation policies and the tax wedge, and demonstrates that they dissipate across open economies. We document evidence of both positive and negative policy spillovers among European economies and carry out a counterfactual of coordinated policies which prove to be needed for some but not other policy variables. We find that coordination strengthens macroeconomic responses to labour market policies.

Keywords: Labour reforms; Policy coordination and spillovers; Cross-country interdependencies; Counterfactuals (search for similar items in EconPapers)
JEL-codes: C32 C33 E24 F12 F16 (search for similar items in EconPapers)
Date: 2018
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