The macroeconomic impact of structural reforms: The case of Italy

Abstract

We propose a methodology to map structural reforms from granular data to an aggregate model, exploring their transmission mechanisms and their macroeconomic and social impacts. We focus on the rich case of the reforms associated with the Italian Recovery and Resilience Plan (RRP). We document a significant potential impact on medium- and long-term GDP and find that the labour market and education measures are the main drivers of the impact on GDP and employment. We also examine the reform distributional effects on the functional income distribution.