The Effects of Emu on Structural Reforms in Labour and Product Markets

57 Pages Posted: 25 Apr 2006

See all articles by Romain Duval

Romain Duval

Organization for Economic Co-Operation and Development (OECD)

Jörgen Elmeskov

Organization for Economic Co-Operation and Development (OECD) - Policy Studies Branch

Date Written: March 2006

Abstract

Will EMU accelerate or retard structural reform in labour and product markets? The theoretical literature is ambiguous. New descriptive evidence provided in this paper suggests that euro-area countries have made relatively good progress in structural reform. However, it is much less clear whether progress can be ascribed to EMU membership. To explore further the influence of monetary regime, the paper undertakes an econometric examination of the likelihood that countries undertake reform in five specific areas of labour and product market policies. Based on pooled cross-country/time series Probit regressions covering 21 countries and the period 1985-2003, it is found that structural reform is strengthened by high unemployment, crisis, healthy public finances, reforms in other policy fields and small country size. Further, countries that pursue fixed exchange-rate regimes or participate in monetary union, and therefore have little or no monetary autonomy, appear to undertake less reform - with the effect possibly being concentrated on large countries.

Keywords: political economy, EMU, euro, reforms, labour market, product market

JEL Classification: D7, O52

Suggested Citation

Duval, Romain and Elmeskov, Jörgen, The Effects of Emu on Structural Reforms in Labour and Product Markets (March 2006). ECB Working Paper No. 596. Available at SSRN: https://ssrn.com/abstract=887083

Romain Duval (Contact Author)

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Jörgen Elmeskov

Organization for Economic Co-Operation and Development (OECD) - Policy Studies Branch ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

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