6533b7d5fe1ef96bd1264f13

RESEARCH PRODUCT

The effects of wage flexibility on activity and employment in Spain

Juan Ramón GarcíaRafael DoménechCamilo Ulloa

subject

MacroeconomicsEstimationFlexibility (engineering)Counterfactual thinkingEconomics and Econometricsmedia_common.quotation_subject05 social sciencesPerspective (graphical)Significant partWage0502 economics and businessEconomics050207 economics050205 econometrics media_common

description

Abstract In this paper we estimate the macroeconomic effects of the greater wage and firms’ internal flexibility promoted by the economic policies implemented since 2012, which changed markedly Spanish labour regulations. To do so, we propose a structural VAR that allows us to break down changes in main macroeconomic variables into different structural shocks. From a policy perspective, the estimation of the structural shocks allows us to simulate a counterfactual scenario, whereby we conclude that the effects of less rigid labour market are positive and significant. Our results suggest that, if these policies were implemented at the beginning of the crisis, they could have avoided a significant part of the falls in GDP and employment.

yearjournalcountryeditionlanguage
2018-11-01Journal of Policy Modeling
https://doi.org/10.1016/j.jpolmod.2018.08.002