calculated using the World Bank Doing Business Surveys . Annex Table 3.3.1. Jointly Calibrated Parameters Parameter Description Value Moment Source Countries Target θ Collateral constraint 0.238 Nonfinancial Private Sector Debt / GDP IMF Global Debt Database 46 31.5% f m Formal sector regulatory entry cost 0.185 Monetized cost of entry regulations as % GDP/capita World Bank Doing Business Surveys 150 30.9% τ y Governance/corruption wedge 0.234 Non-agricultural informal employment share International Labour Organization 66 68% χ Equity issuance constraint 1.275 Market capitalization / GDP World Bank Financial Structures Database 37 37.6% σ z Standard deviation of permanent firm productivity 0.658 Standard deviation of ln(employment) World Bank Enterprise Surveys 89 1.04 σ ε Standard deviation of transitory firm productivity 0.224 Standard deviation of Δln(employment) World Bank Enterprise Surveys 89 0.15 ? Persistence of transitory firm productivity 0.965 Serial correlation of ln(employment) World Bank Enterprise Surveys 89 0.96 Monetary cost of entry regulations and employment protection laws The regulatory formal sector entry cost measures are constructed using data from the World Bank Doing Business Surveys . The procedure follows Ebell and Haefke (2009) and Cacciatore, Duval, Fiori, and Ghironi (2015). It aggregates the financial cost of opening a business with the required number of days and procedures, converted into a fraction of GDP per capita. In a first step, the average number of procedures per day in the sample is calculated. In a second step, a time-cost index is calculated which combines the days and procedures measures as follows: index = (days + procedures/average procedures per day)/2. In a final step, this time-cost index is converted into a share of lost per capita GDP (assuming 220 working days per year), and then added to the financial cost of starting a business (as a share of per capita GDP).
WORLD ECONOMIC OUTLOOK 20 International Monetary Fund | October 2019 Our measure of the labor wedge τ w is constructed from country-specific estimates of the cost of laying off a worker from Furceri and others (2019). The cost is measured in number of months of salary and incorporates both the financial costs of laying off a worker and the length (in months) of the notice required. This is then divided by 12 to express the cost of laying off an employee as a fraction of the yearly salary, and then multiplied by the average yearly US layoff rate in the private sector between 2013 and 2018 to obtain τ w. The US layoff rate is used because the United States have the least regulated labor market of any country in the sample and are therefore closest to having ‘undistorted’ layoff rates. 9 C. Main Reform Simulation Exercises Size of Reforms in the Benchmark Economy The following procedure is used to make the size of the reforms in the model counterfactuals as comparable as possible to the size of the reforms in the empirical section of the chapter.
- Fall '19
- Economics, World Trade Organization, International Monetary Fund, Capital accumulation