When Do Countries Implement Structural Reforms?

29 Pages Posted: 27 Jun 2017

See all articles by Antonio Dias da Silva

Antonio Dias da Silva

European Central Bank (ECB)

Audrey Givone

European Investment Bank

David Sondermann

European Central Bank (ECB)

Date Written: June 20, 2017

Abstract

The objective of this paper is to investigate which factors ‐ macroeconomic, policy‐related or institutional ‐ foster the implementation of structural reforms. To this objective, we look at episodes of structural reforms over three decades across 40 OECD and EU countries and link them to such factors. Our results suggest that structural reforms implementation is more likely during deep recessions and when unemployment rates are high. Moreover, the further distant from best practices, the more likely a country implements reforms. External pressures, such as being subject to a financial assistance programme, or being part of the EU Single Market facilitated pro‐competitive reforms. If at all, low interest rates tend to promote rather than discourage structural reforms, while there seems no clear link between fiscal policy and reforms. Moreover, reforms in product markets tend to increase the likelihood of labour market reforms following suit. Many robustness checks have been carried out which confirm our main results.

Keywords: political economy, structural reforms, linear probability model, panel data

JEL Classification: C23, D70, D72, P11, P16

Suggested Citation

Dias da Silva, Antonio and Givone, Audrey and Sondermann, David, When Do Countries Implement Structural Reforms? (June 20, 2017). ECB Working Paper No. 2078. Available at SSRN: https://ssrn.com/abstract=2992485

Antonio Dias da Silva

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Audrey Givone (Contact Author)

European Investment Bank ( email )

98-100 Boulevard Konrad Adenauer
L-2950
Luxembourg

David Sondermann

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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