Unemployment, growth and welfare effects of labor market reforms

Lim, K.Y. ORCID: 0000-0003-1978-176X and Agénor, P., 2017. Unemployment, growth and welfare effects of labor market reforms. In: 66th Annual Congress of the French Economic Association (AFSE), Université Côte d’Azur (UCA), Nice, France, 19-21 June 2017.

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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 “typical” high- and middle-income economies 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 qualified labor and higher unemployment in the long-run. The effectiveness of labor market reforms, in terms of promoting growth and employment, is enhanced when they are accompanied by productivity-enhancing policies. Public investment in infrastructure, partly through its effects on innovation, may help to mitigate the trade-o§ between growth and welfare associated with these reforms.

Item Type: Conference contribution
Creators: Lim, K.Y. and Agénor, P.
Date: June 2017
Divisions: Schools > Nottingham Business School
Record created by: Jonathan Gallacher
Date Added: 07 Nov 2019 14:52
Last Modified: 07 Nov 2019 14:52
URI: https://irep.ntu.ac.uk/id/eprint/38153

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