The effects of EMU on structural reforms in labour and product markets

Will EMU accelerate or retard structural reform in labour and product markets? The theoretical literature is ambiguous. New descriptive evidence provided in this paper suggests that euro-area countries have made relatively good progress in structural reform. However, it is much less clear whether progress can be ascribed to EMU membership. To explore further the influence of monetary regime, the paper undertakes an econometric examination of the likelihood that countries undertake reform in five specific areas of labour and product market policies. Based on pooled cross-country/time series Probit regressions covering 21 countries and the period 1985-2003, it is found that structural reform is strengthened by high unemployment, crisis, healthy public finances, reforms in other policy fields and small country size. Further, countries that pursue fixed exchange-rate regimes or participate in monetary union, and therefore have little or no monetary autonomy, appear to undertake less reform – with the effect possibly being concentrated on large countries. JEL Classification: D7, O52EMU, euro, labour market, political economy, product market, reforms

The effects of EMU on structural reforms in labour and product markets

Will EMU accelerate or retard structural reform in labour and product markets? The theoretical literature is ambiguous. New descriptive evidence provided in this paper suggests that euro-area countries have made relatively good progress in structural reform. However, it is much less clear whether progress can be ascribed to EMU membership. To explore further the influence of monetary regime, the paper undertakes an econometric examination of the likelihood that countries undertake reform in five specific areas of labour and product market policies. Based on pooled cross-country/time series Probit regressions covering 21 countries and the period 1985-2003, it is found that structural reform is strengthened by high unemployment, crisis, healthy public finances, reforms in other policy fields and small country size. Further, countries that pursue fixed exchange-rate regimes or participate in monetary union, and therefore have little or no monetary autonomy, appear to undertake less reform – with the effect possibly being concentrated on large countries

Ongoing Changes in the Business Cycle - Evidence and Causes

This paper first reviews a number of stylised facts concerning OECD country business cycles over the past four decades. In general, the amplitude of business cycles has fallen, driven mainly by declining fluctuations of domestic demand. As a result, international divergencies of cyclical positions have diminished but, outside the euro area, there is little evidence of increased synchronisation of cycles. The paper then reviews a number of influences on business cycles. The evidence suggests that, on balance, features of macroeconomic policies may have tended to reduce cyclical volatility and structural changes, notably the increased share of the service sector in the economies, have also tended to dampen the cycle. More recently, there are signs that financial market prices have increasingly moved in sympathy across countries, and the final section of the paper illustrates how this could affect the international transmission of cyclical shocks and the associated need for policy response

Efeitos das variáveis macroeconômicas e intitucionais no desemprego: Anáilse para Europa (1985-2011)

Este trabajo evalúa la influencia de las variables macroeconómicas e institucionales en la tasa de desempleo de 14 países de la Unión Europea. Se recurre a un modelo de datos de panel para el período 1985-2011. El mismo permite concluir sobre qué variables macroeconómicas e institucionales puede resultar más adecuado actuar para mejorar la respuesta del mercado de trabajo a los problemas económicos. Del análisis se concluye que la protección excesiva a los trabajadores, el salario mínimo interprofesional, la centralización en la negociación salarial y las elevadas cotizaciones empresariales a la Seguridad Social, así como la escasa competencia en el mercado de productos, pueden explicar, en parte, las mayores tasas de desempleo que presentan algunos países de la Unión Europea.This paper evaluates the influence that macroeconomic and institutional variables have on the unemployment rate in 14 countries within the European Union. A panel data model is used for the 1985-2011-time period. The model allows concluding which macroeconomic and institutional variables could be more effective for improving the labor market response when facing economic difficulties. It can be concluded then that excessive protection for workers, inter-professional minimum salary wage, as well as a low competition in the product market, can partially explain the higher unemployment rates found in several countries of the European Union.Este trabalho avalia a influência das variáveis macroeconômicas e institucionais na taxa de desemprego de 14 países da União Europeia. Se recorre a um modelo de dados de painel para o período 1985-2011. O mesmo permite concluir sobre que variáveis macroeconômicas e institucionais pode resultar mais adequado atuar para melhorar a resposta do mercado de trabalho aos problemas econômicos. Da análise se conclui que a proteção excessiva aos trabalhadores, o salário mínimo inter-profissional, a centralização na negociação salarial e as elevadas cotizações empresariais à Segurança Social, assim como a escassa competência no mercado de produtos, podem explicar em parte as maiores taxas de desemprego que apresentam alguns países da União Europeia

Enforcement of labor regulation and firm size

This paper investigates how the enforcement of labor regulation affects firm size and other firm characteristics in Brazil. We explore firm level data on employment, capital, and output, city level data on economic characteristics and new administrative data measuring enforcement of regulation at the city level. Since enforcement may be endogenous, we instrument this variable with the distance between the city where the firm is located and surrounding enforcement offices, while controlling for a rich set of city characteristics (such as past levels of informality in the city). We present suggestive evidence of the validity of this instrument. We find that stricter enforcement of labor regulation constrains firm size, and leads to higher unemployment