Description

Structural reforms are expected to lift growth and employment, but their effects are
 surprisingly difficult to pin down empirically. One reason is their potential endogeneity to the
 economic environment in which they are conducted. For example, the impact of a reform
 implemented shortly before a cyclical upswing is difficult to distinguish from the recovery
 itself. Similarly, macroeconomic policies conducted along a structural reform could affect the
 estimated impact. Exploring various options, this paper develops robust estimates of the
 impact of labor and product market reforms by using local projection techniques while
 controlling for endogeneity of reforms and other biases. The results suggest that labor and
 product market reforms have a lagged but positive impact on employment creation, and the
 positive effect remains even after controlling for the endogeneity of the decision to reform.
 Supportive macroeconomic policies are found to increase the effect of labor and product
 market reforms, consistent with the view that some structural reforms are best initiated in
 conjunction with supportive fiscal or monetary policy.

More publications in this series: Working Papers

More publications by: Anna Rose Bordon ; Christian Ebeke ; Kazuko Shirono