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One Troika fits all? Job crash, pro-market structural reform and austerity-driven therapy in Portugal

Diogo Martins () and Bruno Damásio
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Diogo Martins: Universidade de Lisboa
Bruno Damásio: Universidade de Lisboa

Empirica, 2020, vol. 47, issue 3, No 3, 495-521

Abstract: Abstract This article assesses the effectiveness of the labour market reforms implemented in Portugal as part of the Troika’s structural reform package. Using an ARDL-bounds test model to perform the econometric estimation, this investigation examines the long-run relationship between unemployment, capital accumulation and labour market variables for the 1985–2013 period. The econometric estimation suggests that capital accumulation has been the main driver of long-run unemployment, whilst labour market variables have played a minor explanatory role. These results suggest that Portuguese NAIRU is endogenous to capital accumulation and do not support the Troika’s emphasis on labor market reforms as a strategy to reduce long-term unemployment.

Keywords: NAIRU; Unemployment; Capital accumulation; Labour market institutions; ARDL; Bounds test (search for similar items in EconPapers)
JEL-codes: E11 E12 E22 E24 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10663-019-09433-w

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