{
  "title": "Structural Reform Packages, Sequencing, and the Informal Economy",
  "publication": "IMF Working Papers, May 26, 2017",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2017/05/26/structural-reform-packages-sequencing-and-the-informal-economy-44950",
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  "summary": "This paper explores the macroeconomic impacts of labor and product market deregulation using a small open-economy model with formal and informal markets.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Paper explores macroeconomic impacts of labor and product market deregulation using a small open-economy model with formal and informal markets.\n- Examines both long-run effects and the transition toward the post-reform equilibrium.\n- Main focus: reform packages and sequencing.\n- The unofficial sector is a major determinant of the sign, and, in particular, the magnitude of responses.\n- South Africa is considered when Bayesian estimating the model.\n- Key high-level conclusions:\n  - Both labor and product market reforms considerably increase output in the long run.\n  - Labor market reforms are more successful in decreasing unemployment.\n  - Short-term costs can include decreases in household consumption, net exports, output, or competition.\n  - Combining reforms, especially with product market deregulation, reduces short-term costs.\n  - Regarding speed of adjustment, it is usually better to start with a labor market reform."
    },
    {
      "heading": "Key findings and projections",
      "content": "- Long-run impacts:\n  - Both labor and product market reforms considerably increase output.\n  - Labor market reforms more effective at lowering unemployment.\n- Transition dynamics and short-run outcomes:\n  - Reforms can cause short-term decreases in household consumption, net exports, output, or competition.\n  - The magnitude and sign of transition responses are strongly influenced by the size and behavior of the unofficial (informal) sector.\n- Interaction effects:\n  - Combining reforms (reform packages) tends to mitigate short-term costs.\n  - Product market deregulation within packages plays an important role in reducing adverse short-term effects."
    },
    {
      "heading": "Policy sequencing and recommendations",
      "content": "- Sequencing:\n  - It is usually better to start with a labor market reform when considering speed of adjustment.\n- Package design:\n  - Combine labor and product market reforms to harness complementary effects and reduce short-term adjustment costs.\n  - Emphasize product market deregulation within reform packages to offset short-term adverse impacts."
    },
    {
      "heading": "Empirical approach and scope",
      "content": "- Model: small open-economy model with formal and informal markets.\n- Estimation: Bayesian estimation using South Africa as the emerging-country case study.\n- Subjects and keywords included in the study: Commodity markets, Employment, Financial markets, Labor, Labor market reforms, Labor markets, Unemployment, Wages; Africa; endogenous firm entry; exit rate; export price elasticity; firm exit; Global; hiring cost; hiring costs; informal employment; labor market; labor market deregulation; physical capital; product market; product market deregulation; product market reform; reform packages; sequencing; shadow economy; small-open economy; structural reforms; unemployment; value function; Wages; WP.\n\n---\n\n Content in this bundle\n\n- Structural Reform Packages, Sequencing, and the Informal Economy, WP/17/125, May 2017\n  - Structural Reform Packages, Sequencing, and the Informal Economy, WP/17/125, May 2017 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Structural Reform Packages, Sequencing, and the Informal Economy, WP/17/125, May 2017 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2017/05/26/structural-reform-packages-sequencing-and-the-informal-economy-44950"
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    "Authors: Zsuzsa Munkacsi, Magnus Saxegaard",
    "Published: May 26, 2017",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484302101.001",
    "Paper explores macroeconomic impacts of labor and product market deregulation using a small open-economy model with formal and informal markets.",
    "Examines both long-run effects and the transition toward the post-reform equilibrium.",
    "Main focus: reform packages and sequencing.",
    "The unofficial sector is a major determinant of the sign, and, in particular, the magnitude of responses.",
    "South Africa is considered when Bayesian estimating the model.",
    "Key high-level conclusions:",
    "Long-run impacts:",
    "Transition dynamics and short-run outcomes:",
    "Interaction effects:",
    "Sequencing:",
    "Package design:",
    "Model: small open-economy model with formal and informal markets.",
    "Estimation: Bayesian estimation using South Africa as the emerging-country case study.",
    "Subjects and keywords included in the study: Commodity markets, Employment, Financial markets, Labor, Labor market reforms, Labor markets, Unemployment, Wages; Africa; endogenous firm entry; exit rate; export price elasticity; firm exit; Global; hiring cost; hiring costs; informal employment; labor market; labor market deregulation; physical capital; product market; product market deregulation; product market reform; reform packages; sequencing; shadow economy; small-open economy; structural reforms; unemployment; value function; Wages; WP.",
    "**Structural Reform Packages, Sequencing, and the Informal Economy, WP/17/125, May 2017**"
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