The effects of wage flexibility on activity and employment in Spain

Citation data:

Journal of Policy Modeling, ISSN: 0161-8938, Vol: 40, Issue: 6, Page: 1200-1220

Publication Year:
Captures 6
Readers 6
Social Media 49
Tweets 49
Rafael Doménech; Juan Ramón García; Camilo Ulloa
Elsevier BV
Economics, Econometrics and Finance
Most Recent Tweet View All Tweets
article description
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.