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This Selected Issues paper on Denmark underlies estimates of inefficiencies in the goods and labor markets. The IMF’s new macroeconomic model, the global economic model (GEM), has been used to provide estimates of the impact of successfully implementing the European Council’s ambitious Lisbon reform agenda. GEM incorporates markups in the goods and labor markets that are summary measures of the net impact of all the regulatory structures in an economy. The euro area goods market reform in the service sector is twice that required in Denmark, the euro area must also increase competition in manufacturing.

Labor --- Macroeconomics --- Demand and Supply of Labor: General --- Labor Economics Policies --- Wages, Compensation, and Labor Costs: General --- Labor Economics: General --- Institutions and the Macroeconomy --- Labour --- income economics --- Labor markets --- Labor market reforms --- Real wages --- Structural reforms --- Macrostructural analysis --- Labor market --- Manpower policy --- Wages --- Labor economics --- Denmark --- Income economics

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To live up to its growth potential and secure its inclusive social model, the euro area must make better use of its available labor. In the aftermath of the crisis, boosting growth is essential to prevent unemployment from becoming a long-term problem and to facilitate the return to fiscal sustainability. Labor utilization in the euro area has been lagging considerably behind its best performing peers. While fewer hours worked may, to some extent, reflect a social choice, higher unemployment rates and lower participation rates, on the other hand, cannot easily be attributed to individual preferences. Here, policies and institutions matter more. And there is little excuse for relatively low labor productivity, a particular bane in southern Europe and an increasing challenge everywhere. Kick-starting growth requires a comprehensive approach to labor and service market reforms. Different circumstances call for different approaches across countries. Countries in southern Europe need to focus on regaining competitiveness, while some in the core should promote higher labor force participation or more open service sector markets. Improving access to the labor market should be high on the priority list everywhere—including through some harmonization of key features of the labor market, which will help deal with intra-euro area imbalances. Differences in labor taxation, unemployment benefit systems, and employment protection will need to be reduced. Improving regulation and reforming taxes and social benefits will be essential to make inroads. For the longer term, focus should be on innovation, education, and on continuing financial sector reforms.

Labor --- Macroeconomics --- Industries: Service --- Labor Economics Policies --- Demand and Supply of Labor: General --- Institutions and the Macroeconomy --- Industry Studies: Services: General --- Labour --- income economics --- Labor markets --- Labor market reforms --- Structural reforms --- Services sector --- Labor policy --- Economic sectors --- Macrostructural analysis --- Labor market --- Manpower policy --- Service industries --- United States --- Income economics

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Spain’s export performance strengthened after the global financial crisis, and exports now represent more than a third of GDP. This paper argues that several factors contributed to that achievement: external demand, supported by greater diversification of destination markets; enhanced export orientation of Spanish firms, partly as a response to lower domestic demand after the crisis; and competitiveness gains, reflecting in part changes in the labor market following structural reforms adopted in 2010 and 2012. Based on cross-country panel regressions linking real export growth to employment protection indicators, those labor market reforms are estimated to account for nearly one-tenth to above one-quarter of Spain’s total export growth rate from 2010 to 2013.

Export marketing --- International marketing --- Overseas marketing --- Marketing --- Exports and Imports --- Labor --- Empirical Studies of Trade --- Trade and Labor Market Interactions --- Trade: General --- Labor Economics Policies --- Trade Policy --- International Trade Organizations --- Demand and Supply of Labor: General --- International economics --- Labour --- income economics --- Macroeconomics --- Export performance --- Exports --- Labor market reforms --- Real exports --- Labor market flexibility --- International trade --- National accounts --- Manpower policy --- Labor market --- Spain --- Income economics

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At the macro level, productivity is driven by technology and the efficiency of resource allocation, as outcomes of firms’ decision making. The relatively high level of resource misallocation in India’s formal manufacturing sector is well documented. We build on this research to further investigate the drivers of misallocation, exploiting micro-level variation across Indian states. We find that states with less rigid labor markets have lesser misallocation. We also examine the interaction of labor market rigidities with informality which is a key feature of India’s labor markets. Our results suggest that reducing labor market rigidities in states with high informality has a net positive effect on aggregate productivity.

Labor --- Macroeconomics --- Production and Operations Management --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- Institutions and Growth --- Measurement of Economic Growth --- Aggregate Productivity --- Cross-Country Output Convergence --- Economic Growth and Aggregate Productivity: General --- Labor Economics Policies --- Labor Economics: General --- Macroeconomics: Production --- Labor Contracts --- Labour --- income economics --- Total factor productivity --- Labor market reforms --- Productivity --- Employment protection --- Industrial productivity --- Manpower policy --- Labor economics --- India

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Spain’s structural reforms, implemented around 2012, have arguably contributed to a faster and stronger economic recovery. In particular, there is strong evidence that the 2012 labor market reforms increased wage flexibility, which helped the Spanish economy to regain competitiveness and create jobs. But the impact of these labor reforms on income inequality and social inclusion has not been analyzed much. This paper aims to shed light on this issue by employing an econometric decomposition procedure combined with the synthetic control method. The results indicate that the 2012 labor reforms have helped improve employment and income equality outcomes with no substantial impact on the overall risk of poverty. Nevertheless, the reforms appear to have induced a deterioration of average hours worked, in-work poverty, and possibly also of involuntary part-time employment.

Labor --- Macroeconomics --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Aggregate Factor Income Distribution --- Labor Economics Policies --- Economic Development: Human Resources --- Human Development --- Income Distribution --- Migration --- Labor Economics: General --- Labour --- income economics --- Labor market reforms --- Income inequality --- Income distribution --- National accounts --- Manpower policy --- Economic theory --- Labor economics --- Spain