On stabilisation policy: Are there conflicting implications for growth and welfare?

The paper examines the choices for fiscal stabilisation policy that maximise aggregate welfare and long-run growth. This is done in the context of a stochastic dynamic general equilibrium model where premeditated learning provides the engine of human capital accumulation and growth, and technology shocks provide the impulse source of fluctuations. Contrary to existing conventional wisdom, the results indicate a conflict between the two policy objectives: the choice of no stabilisation, associated with maximum growth, is also associated with minimum welfare. Welfare maximisation requires a full stabilisation response to the occurrence of business cycles.money; growth; volatility.

On economic growth and minimum wages

We offer an analysis of the existence of a positive relationship between minimum wages and economic growth in a simple one-sector overlapping generations economy where the usual Romer-typed knowledge spill-over mechanism in production represents the engine of endogenous growth, in the case of both homogeneous and heterogeneous (i.e., skilled and unskilled) labour. Assuming also the existence of unemployment benefits financed with consumption taxes not conditioned on age at a balanced budget, it is shown that minimum wages may stimulate economic growth and welfare despite the unemployment occurrence. Moreover, a growth-maximising minimum wage can exist. A straightforward message, therefore, is that a combination of minimum wage and unemployment benefit policies can appropriately be used to promote balanced growth and welfare.Endogenous growth; Minimum wage; Unemployment; OLG model

Is corporatism feasible?

In this paper we consider a standard policy game between the Government and a union. In such a framework, we first investigate the effects of corporatism on macroeconomic performance vis-à-vis different kinds of non-co-operative equilibria. Afterwards, we introduce in the literature the issue of the feasibility of corporatism, i.e., whether and under what conditions it is in the interest of both agents to implement a corporatist approach to economic policies. We find that it is difficult to implement corporatism, although it generally increases social welfare, since it often reduces the union’s utility. In particular, we show that a micro-founded union will never find it profitable to co- operate with the Government, unless side-payments are considered. The study of this last issue is however beyond the scope of this paper.employment, inflation, trade unions, government, corporatism, policy game, feasibility

Macroeconomic impact from extending working lives (WP95)

This report presents findings from research, conducted by the National Institute of Economic and Social Research (NIESR) and funded by the Department for Work and Pensions (DWP). NIESR were commissioned to use their global econometric model, NiGEM, in order to model various scenarios involving extending working lives, and to quantify the macroeconomic effects therein. The core scenario is a one year increase in working life for the UK population that is gradually phased in over the period 2010-14. In addition to this, NIESR carried out a series of counterfactual analyses which modelled the loss to the economy from older people leaving the labour market early

Social Preferences in Wage Bargaining: a Neocorporatist Approach

The starting point in this paper is based on the strand of the literature on corporatist systems stressing the role of co-operation and consensus in wage bargaining in order to reach better economic performances. In order to model a co-operative regime in the classical framework in which the monopoly union controls wages and the firm controls employment, we introduce social preferences with some degree of other-regarding concern(ORC) such that each agent's objective function is a linear combination of her own welfare and the other's. The results show that under specific conditions concerning the degree of ORC, one may obtain an employment level higher than in the selfish case and wage moderation.wage bargaining; corporatism; cooperation; social preferences

A perspective on UK productivity performance

The paper reviews recent UK productivity performance using insights from new growth economics and its embodiment in growth accounting techniques. The sources of the UK labour productivity gap are found to differ across countries; broad capital per worker plays a larger part with regard to France and Germany while innovation matters more compared with the USA. The role of incentive structures is examined and the importance of competition as an antidote to agency problems in UK firms is highlighted. Current UK policy is reviewed and the need to address government as well as market failures is stressed.

The Role of EU Integration in Accelerating Structural Reforms in the Western Balkans: Evidence, Theory and Policy. LEQS Paper No. 140/2019 January 2019

Integration with the European Union has been an important driver of economic, political and social transformation in the Western Balkans. In recent years, however, the pace of structural reforms in the region has decelerated and the trend of economic catch-up seen in the 2000s has not resumed after the slowdown of the global economic crisis. This has coincided – at least temporally, if not causally – with a ‘temporary freeze’ in the EU’s enlargement towards the region. Against this backdrop, this paper seeks to investigate the role of EU conditionality on economic reforms and convergence in the Western Balkans. To do so, it provides original, albeit descriptive, empirical evidence showing a strong link between EU-related structural reforms (towards the Copenhagen Criteria) and economic growth; and subsequently presents an analytical model demonstrating the mechanisms of policy decisions for reforms under EU conditionality. The model assumes away sectoral interests, policy uncertainty and coordination problems, allowing the analysis to focus specifically on the tension between two objectives: the pursuit of EU accession, through the implementation of jointly agreed reforms, and the accommodation of domestic policy concerns (maintaining policy stability and public support). Our results unveil a policy dilemma for the EU, having to choose between maximising the reform effort and minimising non-compliance. Drawing on this model, we discuss extensively the policy options that the EU faces in trying to enhance the reform performance, growth trajectories and, ultimately, European perspective of the countries in the region

An indicator-based assessment framework to identify country-specific challenges towards greener grow

The paper sets the basis for an indicator-based analytical framework to assess Member States' policies to promote "green growth".An illustrative application of this new analytical framework reveals that it can be used to provide a nuanced economic assessment of Member States' environmental performance. This framework can serve to highlight country-specific strengths in addressing environmental challenges in a way that best fosters growth and jobs. To prepare for future economic policy monitoring at the EU level, a test was also run to analyse performance in various dimensions of environmental policy in combination with information about macroeconomic performance.Overall, this framework can contribute to identify country-specific challenges to create new sources of green growth; it may therefore serve to encourage relevant structural reforms bringing about a competitive greener economy.europa european commission institutions news calendar organisation commissioners president recruitment contact services european union eu