Unemployment, growth and welfare effects of labor market reforms

Agénor, P-R and Lim, KY ORCID: https://orcid.org/0000-0003-1978-176X, 2018. Unemployment, growth and welfare effects of labor market reforms. Journal of Macroeconomics, 58, pp. 19-38. ISSN 0164-0704

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Abstract

The effects of labor market reforms are studied in an innovation-driven model of endogenous growth with a heterogeneous labor force, labor market rigidities, and structural unemployment. The model is calibrated for a stylized middle-income economy in Latin America and used to perform a range of experiments, including both individual labor market reforms (cuts in the minimum wage and unemployment benefit rates) and composite reform programs involving additional measures. The results show that individual reforms may generate conflicting effects on growth and welfare in the long run, even in the presence of positive policy externalities. A reduction in training costs may also create an oversupply of qualifed labor and higher unemployment in the long run. Public investment in infrastructure, partly through its effects on innovation, can help to mitigate this oversupply problem.

Item Type:	Journal article
Publication Title:	Journal of Macroeconomics
Creators:	Agénor, P.-R. and Lim, K.Y.
Publisher:	Elsevier
Date:	December 2018
Volume:	58
ISSN:	0164-0704
Identifiers:	Number Type 10.1016/j.jmacro.2018.08.009 DOI S0164070418301034 Publisher Item Identifier
Divisions:	Schools > Nottingham Business School
Record created by:	Linda Sullivan
Date Added:	11 Sep 2018 08:24
Last Modified:	23 Aug 2019 03:00
URI:	https://irep.ntu.ac.uk/id/eprint/34468

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