No. 1303 - The effects of structural reforms: Evidence from Italy

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by Emanuela Ciapanna, Sauro Mocetti and Alessandro NotarpietroNovember 2020

This paper assesses the macroeconomic effects of structural reforms implemented in Italy between 2011 and 2017 (service sector liberalizations, incentives to innovation, civil justice reforms). The quantitative analysis is based on three steps: selection of a quantitative indicator that measures the impact of the reform; estimation of the effects of the reform on some variables of interest, such as markup (difference between price and production cost of goods/services) or total factor productivity (TFP); simulation of a dynamic general equilibrium model to evaluate the macroeconomic effects.

According to our estimates, service sector liberalization increased TFP by 4.3% and decreased markup by 0.7 percentage points; incentives to innovation and civil justice reform increased TFP by 1.4 and 0.5%, respectively. The increase in the level of GDP as of 2019 due to the sole effect of the reforms (ignoring all other shocks that hit the Italian economy in the same period) would be//would have been between 3% and 6%; the increase in potential output would lie//would have lain between 4% and 8%, with non-negligible effects on employment.

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