TY - JOUR
T1 - Unemployment, growth and welfare effects of labor market reforms
AU - Agénor, Pierre Richard
AU - Lim, King Yoong
N1 - Publisher Copyright:
© 2018 Elsevier Inc.
PY - 2018/12
Y1 - 2018/12
N2 - 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 qualified 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.
AB - 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 qualified 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.
UR - http://www.scopus.com/inward/record.url?scp=85054104650&partnerID=8YFLogxK
U2 - 10.1016/j.jmacro.2018.08.009
DO - 10.1016/j.jmacro.2018.08.009
M3 - Article
AN - SCOPUS:85054104650
SN - 0164-0704
VL - 58
SP - 19
EP - 38
JO - Journal of Macroeconomics
JF - Journal of Macroeconomics
ER -