Economic policy

Economic policy

1. They can

   • improve productivity growth
   • improve employment in long run
   • involve significant reallocation
   • May further aggravate household's conditions

2. Reductions in barriers to entry policy

   • Improve efficiency in production
   • price setting process more competitive
   • Focus on: ENERGY, TRANSPORT, COMMUNICATION
     • play important role
     • product as key inputs for other branches
     • offer room for further deregulation
     • Long time series datasets
   • CONSEQUENCES ON EMPLOYMENT AND WAGE
     • Net loss on employment in the 3rd year after reform
       • No evidence in short run of significant fall in wages
     • In good periods cost of reforms in terms of job creation will be lower than in crisis period
       • Conclusion: induces direct costs in employment losses which are rapidly absorbed but not necessary in gains
   • IMPACT ON THE LABOUR MARKET PERFORMANCE
     • In two depended industries the more dependent will have higher employment gains in the long run
       • No evidence about the impact based on initial level of regulation
         • Conclusion: the costs depend on the characteristics of the industry

3. Increased flexibility in employment protection legislation policy

   • Set of rules governing hiring and firing workers
   • EPL creates positive firing costs
     • EPL is a key of labour market dualism
       • Permanent contracts
       • Temporary contract
       • EPL have a limited positive impact on employment level in long run and studies on the short run are rare
         • EPL reforsm costly in the short run
           • Longer-lasting losses in downturns
           • CASE OF SPAIN
             • Reforms accompanied by decentralization of collective bargaining
             • Measures to achieve greater flexibility
             • No evidence on short-term in unemployment
             • Reform occurred in period of fluctuations
         • Ambiguous effect in the long run
           • Reduction of dualism thanks to EPL

4. Complementary labour market policies

   • Can be put in place to minimize short-term employment costs
   • Can reduce the impact on the income of unemployed people
   • The choice depends on available resources and infrastructure
   • Grandfathering could be a way to reduce short run costs