General equilibrium theory

Operating system

Total factor productivity

Monetary policy

Macroeconomics

Econometrics

Economics

Microeconomics

Management

Productivity

Structural estimation

Incentive

Computer science

Markup language

Dynamic stochastic general equilibrium

Estimation

Economic Policy

SUMMARY This paper quantifies the macroeconomic effects of three major structural reforms (i.e. service sector liberalizations, incentives to innovation and civil justice reforms) undertaken in Italy in the last decade. We employ a novel approach that estimates the impact of each reform on total factor productivity (TFP) and markups in an empirical micro setting and uses these estimates in a dynamic general equilibrium model to simulate the macroeconomic effects of the reforms. Microeconometric estimates indicate that the reforms imply a sizeable increase in TFP and a reduction in service markup. Structural model–based analysis shows that, accounting for estimation uncertainty, the increase in the level of GDP at the end of the current decade would be between 3.5% and 8%, with non-negligible effects on the labour market.

The macroeconomic effects of structural reforms: an empirical and model-based approach