Picture from the link http://ec.europa.eu/economy_finance/structural_reforms/index_en.htm

 

 

Excerpts from the first two publications of the link will follow the tweet below.

"Selection of relevant publications"
·         The role of structural reforms for adjustment and growth
·         Market Reforms at Work

 

 

ECB @ecb

2015-05-22
Speech Mario Draghi: Structural Reforms, Inflation and Monetary Policy ecb.europa.eu/press/key/date…

 

 

Excerpt:

Type of reforms

 

On the “centralised wage agreements”

"For example, the experience of Germany during the crisis suggests that reforms aimed at adjustment through the intensive margin – that is, working hours and wages – are less likely to have negative short-term effects than reforms that operate through the extensive margin – i.e. dismissals.[20] This is supported by new micro level research from the Eurosystem which shows that, for a larger sample of countries, firms with flexibility at the plant-level have reduced employment less during the crisis than those bound by centralised wage bargaining agreements, partly because they have been more able to adjust wages to economic conditions.[21]"

 

 

The most promising sectors for immediate strong results: “professional services and retail trade”
"Moreover, if reforms are targeted specifically at frictions that hold back investment demand, their short-term effects should be largely positive, even at the bottom of the cycle. For instance, reforms directed at sectors with large pent-up demand, such as professional services and retail trade, could be expected to elicit a rapid investment response.[22] Indeed, our EAGLE simulations show that the short-term benefits from structural reform in the service sector arise mainly via a strong reaction of investment."

 

 

Speeding up entry and if necessary exit/moving on of companies in the market
"Similarly, reforms designed to reduce bottlenecks to new investment that come from onerous business conditions should also have mainly benefits in the short-term. This would include measures such as reducing the administrative burden on young firms, or speeding up insolvency proceedings that raise the opportunity cost of investment by tying up capital for years longer than initially assumed."

 

 

The role of structural reforms for adjustment and growth (pdf)

Link to document from page http://ec.europa.eu/economy_finance/structural_reforms/index_en.htm 

Excerpts:

The selected indicators cover the following areas:

1.       easiness of doing business (from World Bank);
2.       quality of regulation, rule of law and corruption (World Bank);
3.       business regulation and property rights (Fraser Institute);
4.       goods market efficiency (World Economic Forum);
5.       late payments (Intrum Justitia);
6.       efficiency of judicial system (CEPEJ).
7.       Finally, an indicator directly measuring reform effort (Product Market Regulation indicator from OECD) is also included.

 

A number of high-unemployment countries have also taken steps aimed at decentralising and rationalising the wage setting system and easing the adaptation of wage conditions to the economic environment (e.g. France, Italy, Portugal, Spain). Social partners played a key role in this process in most countries, both in the preparation of new legislation and by concluding bipartite or tripartite agreements and social pacts detailing the application of existing legal frameworks.
 
BOX: Empirical assessment of the impacts of selected reforms 
 
Reform of regulated professions
 
The ‘liberal professions’ are generally defined as occupations requiring special training in the arts or sciences, such as lawyers, engineers, architects and accountants. Some of these professions are closely regulated by national governments and professional bodies which limit the number of entrants into the profession, set the rates that can be charged, determine the organisational structure of businesses providing professional services, and protect exclusive rights enjoyed by practitioners. 
 
Such intensive regulation can hold back the performance of these sectors, with significant costs for consumers and downstream businesses. A more flexible and transparent regulatory framework would facilitate the mobility of qualified professionals within the Internal Market, the cross-border provisions of professional services and, at a more microeconomic level, through enhanced competition, improve resource reallocation within sectors and decrease mark-ups. 
 
Large-scale reforms of regulated professions are taking place in a number of Member States (e.g. Poland, Portugal and Slovenia). In a forthcoming publication of European Commission staff, the impacts of reforms of regulated professions are quantified, using a novel ‘two-step’ approach in order to analyse the various transmission channels through which reforms affect performance. This exercise shows that reforming regulated professions can generate substantial gains for consumers and firms.
 
The first step investigates the impact of reforms in regulated professions and the entry, growth and exit of firms in the selected sectors. The second step quantifies the relationship between entry, growth, and exit of firms on performance indicators. For example, it is found that a reduction of the Product Market Regulation indicator of the OECD by 1 point (on a scale from 0 to 6, where higher numbers are associated with increased restrictiveness) increases the birth rate of new companies in the relevant sectors by 0.8 %-point, which in turn correspond to a reduction of the profit rate by 5.4 %-point.
 
The analysis shows that civil justice efficiency (measured by disposition time and the ratio of pending civil and commercial cases to population) is the main transmission channel linking judicial reforms to economic variables. The findings support the growth potential of judicial reforms rationalising the organisation of courts, fostering investment in in-court ICT and reducing excessive litigation rates (forinstance by enhancing alternative disputes resolution procedures), which are all found to positively affect the efficiency of civil justice. Through increased judicial efficiency, these reforms can potentially enhance entrepreneurial activity (as measured by firms’ entry rates) and FDI.
 
 
in Italy, Spain, Portugal and Greece
 
 
Well-functioning transmission mechanisms require that firms can enter and grow unimpeded and that inefficient ones can restructure or exit without hurdles; that prices and mark-ups are flexible enough to properly act as signalling devices; and that reallocation of resources takes place towards the most productive uses and activities.
 
In Spain, efforts to reduce the cost and complexity of registering new companies seem to have yielded results, as the entry rate for micro firms (firms with less than nine employees) in the retail sector rose significantly, from 9.4 % to 11.7 % between 2010 and 2013. Service sector liberalisation may have helped to attract many new foreign companies, particularly to the country’s scientific and professional services sectors, despite a recession. The length of insolvency proceedings has also been substantially reduced from an average of more than 2.5 years to just one year -for simplified procedures- helping banks to curtail the deterioration of their loan portfolios and helping entrepreneurs to move on.
 
In Portugal, a pilot programme to replace authorisations and licensing procedures for the accommodation and the food and beverage sectors has contributed towards a 1 600 jump in the number of new firm registrations over the years 2011-2012 compared to 2009-2010.
 
(Italy) Improvements in preinsolvency procedures, which allow companies to stay in business by providing creditor protection at an earlier stage, have been well received.
 
Greece has made significant efforts to improve its business environment and continues to do so but monitoring the implementation and actual take-up of reforms is difficult due to a lack of data. The introduction of an electronic registry to simplify the creation of new businesses and the introduction of a new form of limited liability corporation that has no capital requirement may have helped Greece rise 110 places to 36th out of 189 in the World Bank’s Doing Business Report, the biggest improvement of any country between July 2012 and June 2013. There is also evidence to suggest that Greece’s efforts to liberalise its heavily protected professions have made some headway.
 
The efficiency of justice is a fundamental consideration when making investment decisions or launching new business operations. Efforts to decrease the average length of trials and the backlog of court cases therefore bring significant positive economic effects. A 10 % reduction in trial lengths has the potential to increase the entry rate of firms by almost 1 percentage point. Over the period 2010-2012 only Portugal and Spain decreased trial lengths (by 10.7 %and 8.1 %, respectively).
 
Estimates for Italy, Spain and Portugal (no data was available for Greece) show that the liberalisation of protected professions has benefits for economic efficiency. In Spain, for example, reforms to professional services could trigger a restructuring of the sector leading to an estimated increase in the legal sector’s efficiency by 2 percentage points, which will translate into a substantial gain in labour productivity. Gains are even larger for Italy.
 
The study also suggests that reforms to ensure that public authorities pay their bills within a reasonable time frame can have a real impact on the survival of many companies. Reforms introduced in Portugal to reduce late payments are estimated to have averted the exit of 4900 companies from the market between 2010 and 2013.
 
Reforms encouraging the digital economy appear to be paying off too. The auctioning of mobile telephony frequency spectrums has contributed to a 27.4 % fall in the cost of mobile phone usage in Portugal and a 26.9 % fall in the cost in Italy. Altogether, the combined effect of measures covering radio spectrum allocation as well as improvements in e-skills, e-commerce and fixed broadband are estimated to have a long term impact on GDP amounting to 1.5 % in Italy, 1 % in Portugal, 0.9 % in Spain and 0.6 % in Greece.