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9 - On the Complementarity between Labour Market Regulation and Tax Reforms in the European Union

from Part II - Macroeconomic Implications of Reforms

Published online by Cambridge University Press:  31 March 2020

By
Angelo Martelli ,
Nauro F. Campos ,
Michael Ganslmeier ,
Yuemei Ji  and
Orkun Saka
Edited by
Nauro F. Campos ,
Paul De Grauwe  and
Yuemei Ji
Nauro F. Campos
Affiliation:
University College London
Paul De Grauwe
Affiliation:
London School of Economics and Political Science
Yuemei Ji
Affiliation:
University College London
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Summary

One reason the effects of individual structural reforms are notoriously difficult to capture is the possibility that they depend upon other reforms and institutions. This chapter studies whether and to what extent reforms in labour market regulation are complementary to tax changes in increasing employment in the European Union (EU). We use a dynamic model of employment growth to estimate and try to disentangle the individual effects from the combined effects of these reforms using a yearly panel of EU countries from 1990 to 2015. Our estimates suggest that reform complementarity between labour market policy and taxation, through substantial and significant interaction effects, seems key to foster employment growth and enhance the effectiveness of both reforms.

Keywords

structural reformslabour market regulationtax wedgeemployment growth
Type
Chapter
Information
Economic Growth and Structural Reforms in Europe , pp. 280 - 314
Publisher: Cambridge University Press
Print publication year: 2020

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