The potential growth impact of structural reforms in the EU. A benchmarking exercise

This paper presents a quantitative model-based assessment of the potential impact of structural reforms in the EU Member States. By comparing structural indicators of labour and product markets, a gap is defined for each indicator relative to the 3 best performers. Scenarios are then simulated in which half the gap vis-à-vis best performance is closed, to avoid setting unrealistic and/or unattainable targets. The simulations show large potential gains in output and employment, raising EU GDP by 3 % after five years and 6% after ten years. While competitiveness gains are smaller under simultaneous reforms, higher demand effects help to support growth in trading partners.