Distributional Implications of Labor Market Reforms: Learning from Spain's Experience

31 Pages Posted: 12 Mar 2020

See all articles by Ara Stepanyan

Ara Stepanyan

International Monetary Fund (IMF)

Jorge Salas

International Monetary Fund (IMF)

Date Written: February 2020

Abstract

Spain's structural reforms, implemented around 2012, have arguably contributed to a faster and stronger economic recovery. In particular, there is strong evidence that the 2012 labor market reforms increased wage flexibility, which helped the Spanish economy to regain competitiveness and create jobs. But the impact of these labor reforms on income inequality and social inclusion has not been analyzed much. This paper aims to shed light on this issue by employing an econometric decomposition procedure combined with the synthetic control method. The results indicate that the 2012 labor reforms have helped improve employment and income equality outcomes with no substantial impact on the overall risk of poverty. Nevertheless, the reforms appear to have induced a deterioration of average hours worked, in-work poverty, and possibly also of involuntary part-time employment.

Keywords: Labor market reforms, Labor market institutions, Labor market policy, Labor policy, Labor productivity, structural reforms, income inequality, social inclusion, synthetic control method, WP, labor market reform, country-specific, labor reform, risk of poverty, pre-reform

JEL Classification: E24, E25, J08, O15, E2, E01, J3, Z13

Suggested Citation

Stepanyan, Ara and Salas, Jorge, Distributional Implications of Labor Market Reforms: Learning from Spain's Experience (February 2020). Available at SSRN: https://ssrn.com/abstract=3553186 or http://dx.doi.org/10.2139/ssrn.3553186

Ara Stepanyan (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jorge Salas

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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