The effects of labour market reforms upon unemployment and income inequalities: an agent-based model

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December 2017
Paper author(s): 
Giovanni Dosi
Marcelo C. Pereira
Andrea Roventini
Maria Enrica Virgillito
Poverty - Inequality - Aid Effectiveness

This work analyses the effects of labour market structural reforms by means of the labour-augmented ‘Schumpeter meeting Keynes’ (K+S) Agent-Based model. We introduce a policy regime change characterized by a set of structural reforms on the labour market. Confirming a recent IMF report, the model shows how structural reforms reducing workers’ bargaining power and compressing wages tend to increase (a) unemployment, (b) functional income inequality and (c) personal income inequality. We further undertake a global sensitivity analysis on key variables and parameters which corroborates the robustness of our findings.


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