Structural Reforms and Labor Reallocation: A Cross-Country Analysis

IMF Working Papers, March 19, 2018

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Structural Reforms and Labor Reallocation: A Cross-Country Analysis

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Bibliographic details

• Authors: Khalid ElFayoumi, Anta Ndoye, Sanaa Nadeem, Gregory Auclair
• Published: March 19, 2018
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484346983.001

Research question and methodology

• Objective: Measure the speed of sectoral labor adjustment and quantify how structural reforms affect the costs of labor reallocation from low- to high-productivity sectors.
• Data and approach: Cross-country sector-level data analyzed using a dynamic panel error correction model.

Key empirical findings

• Convergence speed: On average, sectoral employment shares converge towards equilibrium allocations, closing about 13.7 percent of labor productivity gaps each year.
• Heterogeneity: The speed of labor adjustment varies across sectors and income groups.
• Structural reform associations: More efficient labor reallocation is significantly associated with:
  • financial market liberalization
  • less bureaucracy
  • strong judicial and regulatory environment
  • trade liberalization
  • better education
  • more flexible labor and product markets

Policy implications and recommendations

• Promote financial market liberalization to reduce frictions in labor reallocation.
• Reduce bureaucratic barriers to facilitate movement of labor across sectors.
• Strengthen judicial and regulatory frameworks to support efficient reallocation.
• Advance trade liberalization to lower barriers that impede sectoral shifts.
• Invest in education to improve worker mobility and sectoral matching.
• Implement reforms to increase flexibility in labor and product markets.

Publication and document identifiers

• Authors: Khalid ElFayoumi, Anta Ndoye, Sanaa Nadeem, Gregory Auclair
• Date: March 19, 2018
• Series: Working Paper No. 2018/064
• Volume: 2018
• Issue: 064
• Pages: 41
• DOI: https://doi.org/10.5089/9781484346983.001
• Stock No: WPIEA2018064
• ISBN: 9781484346983
• ISSN: 1018-5941

IMF Working Paper — Structural Reforms and Labor Reallocation: A Cross-Country Analysis

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• Structural Reforms and Labor Reallocation: A Cross-Country Analysis, WP/18/64, March 2018
  • Structural Reforms and Labor Reallocation: A Cross-Country Analysis, WP/18/64, March 2018 (Markdown version)
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