Lessons from Successful Labor Market Reformers in Europe

Author/Editor:

Anthony M Annett

Publication Date:

May 1, 2007

Electronic Access:

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Disclaimer: This Policy Dicussion Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working 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:

Employment Europe Fiscal adjustment Labor market reforms Labor supply Political economy Tax reductions Wage bargaining Wage moderation

English

Publication Date:

May 1, 2007

ISBN/ISSN:

9781451975352/1934-7456

Stock No:

PPIEA2007001

Format:

Paper

Pages:

25

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