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Lessons from Successful Labor Market Reformers in Europe

Author/Editor: Annett, Anthony
Authorized for Distribution: May 1, 2007
Electronic Access: Free Full Text (PDF file size is 446KB)
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Disclaimer: This Policy Discussion Paper should not be reported as representing the views of the IMF. The views expressed in this Policy Discussion Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Policy Discussion Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Welfare states can be reformed successfully, and popular support for reforms can be maintained. But this requires an internally consistent package of labor market, fiscal, and product market reforms, including some kind of buy-in, through, for example, tax cuts. Empirical analysis combined with a select number of case studies-comprising Ireland, Denmark, the Netherlands, and the United Kingdom-reveals that successful reformers focused on increasing labor supply through benefit reform, lowering tax wedges, and lowering government consumption. At the same time, greater labor supply translated into employment growth more effectively in the presence of liberal labor and product markets.
Series: Policy Discussion Paper No. 07/1
Subject(s): Labor market reforms | Europe | Labor supply | Tax reductions | Wage bargaining | Political economy | Employment
Author's keyword(s): Labor supply | wage moderation | fiscal adjustment | political economy
    Published:   May 1, 2007        
    ISBN/ISSN:   1934-7456   Format:   Paper
    Stock No:   PPIEA2007001   Pages:   23
    Price:   US$18.00
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