The Effects of Labour Market Reforms upon Unemployment and Income Inequalities: An Agent Based Model

33 Pages Posted: 6 Jul 2016

See all articles by Giovanni Dosi

Giovanni Dosi

Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM)

Marcelo C. Pereira

University of Campinas

Andrea Roventini

Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM); Observatoire Français des Conjonctures Economiques (OFCE)

Maria Enrica Virgillito

Scuola Superiore Sant'Anna di Pisa

Date Written: July 3, 2016

Abstract

This paper is meant to analyse the effects of labour market structural reforms by means of an agent-based model. Building on Dosi et al. (2016b) we introduce a policy regime change characterized by a set of structural reforms on the labour market, keeping constant the structure of the capital- and consumption-good markets. Confirming a recent IMF report (Jaumotte and Buitron, 2015), the model shows how labour market structural reforms reducing workers’ bargaining power and compressing wages tend to increase (i) unemployment, (ii) functional income inequality, and (iii) personal income inequality. We further undertake a global sensitivity analysis on key variables and parameters which confirms the robustness of our findings.

Keywords: Labour Market Structural Reforms, Income Distribution, Inequality, Unemployment, Long-Run Growth

JEL Classification: C63, E02, E12, E24, O11

Suggested Citation

Dosi, Giovanni and Pereira, Marcelo and Roventini, Andrea and Virgillito, Maria Enrica, The Effects of Labour Market Reforms upon Unemployment and Income Inequalities: An Agent Based Model (July 3, 2016). Available at SSRN: https://ssrn.com/abstract=2804220 or http://dx.doi.org/10.2139/ssrn.2804220

Giovanni Dosi (Contact Author)

Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM) ( email )

Piazza Martiri della Liberta, 33
Pisa, I-56127
Italy

HOME PAGE: www.lem.sssup.it

Marcelo Pereira

University of Campinas ( email )

Rua Pitagoras 353
Campinas, Campinas 13088-857
Brazil

Andrea Roventini

Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM) ( email )

Piazza Martiri della Liberta', 33-I-56127
Pisa
Italy

Observatoire Français des Conjonctures Economiques (OFCE)

69 Quai d'Orsay
Paris 75004
France

Maria Enrica Virgillito

Scuola Superiore Sant'Anna di Pisa ( email )

Biblioteca Scuola Superiore Sant'Anna
Piazza Martiri della Liberta, n. 33
Pisa, 56127
Italy

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