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One Troika fits all? Job crash, pro-market structural reform and austerity-driven therapy in Portugal

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Abstract

This article assesses the effectiveness of the labour market reforms implemented in Portugal as part of the Troika’s structural reform package. Using an ARDL-bounds test model to perform the econometric estimation, this investigation examines the long-run relationship between unemployment, capital accumulation and labour market variables for the 1985–2013 period. The econometric estimation suggests that capital accumulation has been the main driver of long-run unemployment, whilst labour market variables have played a minor explanatory role. These results suggest that Portuguese NAIRU is endogenous to capital accumulation and do not support the Troika’s emphasis on labor market reforms as a strategy to reduce long-term unemployment.

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Notes

  1. For an extensive analysis of the measures proposed by Troika and their social and economic implications see ILO (2013).

  2. Some series are not published on a quarterly basis. In these situations, we used the interpolation methods calculated by Eviews 9 software. For each case, the chosen interpolation method was the one that better preserved the original series behavior. We used linear interpolation for SEPR, SEPT and UD and quadratic interpolation for GRR and TOT.

  3. Another possible source of concern would be the presence of serial correlation in the error term. However, we have already ruled out that possibility.

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Authors and Affiliations

  1. ISEG (Lisbon School of Economics ad Management), Universidade de Lisboa, Rua Miguel Lupi, No. 20, Gabinete 115, Lisboa, Portugal

    Diogo Martins

  2. Centre for Social Studies, University of Coimbra, Coimbra, Portugal

    Diogo Martins

  3. ISEG (Lisbon School of Economics and Management), CEMAPRE, Universidade de Lisboa, Lisboa, Portugal

    Bruno Damásio

  4. NOVA Information Management School (NOVA IMS), Universidade Nova de Lisboa, Lisboa, Portugal

    Bruno Damásio

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  1. Diogo Martins
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  2. Bruno Damásio
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Correspondence to Diogo Martins.

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Appendix

Appendix

See Tables 4, 5, 6, 7, 8, 9 and 10; Fig. 1 .

Table 4 ADF unit root test
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Table 5 Data sources
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Table 6 Composite variables
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Table 7 Descriptive statistics
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Table 8 Unit root test-ADF test
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Table 9 Residual and stability diagnosis
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Table 10 Wald test
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Fig. 1
figure 1

Estmated residuals

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Martins, D., Damásio, B. One Troika fits all? Job crash, pro-market structural reform and austerity-driven therapy in Portugal. Empirica 47, 495–521 (2020). https://doi.org/10.1007/s10663-019-09433-w

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