September 22, 2017

Structural reforms can jumpstart productivity in countries with weaker initial productivity, and help them catch up with their peers 

Labor and product market reforms, which make economies more efficient, can benefit all countries. But they are especially helpful in jumpstarting productivity in countries where productivity is weaker. This is good news as it implies that reforms are one route through which countries with lower per capita incomes can catch up with richer countries instead of persistently lagging behind: economic hardship is not destiny. Our new paper provides fresh arguments in favor of the often-difficult structural reforms.

Structural reforms—the retooling of the regulations and structures that govern a country’s economy—remain politically and socially difficult to implement in many countries, because transitioning to the new regime may create winners and losers from adjustment. This is universally true, including in the euro area. Our study looks into which countries gain most from structural reforms and why, thereby once again making the case for such reforms, despite their associated costs.

The least efficient gain the most Den Rest des Beitrags lesen »