S. D’Andrea, S. D’Andrea, G. Di Bartolomeo, P. D’Imperio, G. Infantino, M. Meacci – Structural Reforms in the Italian Recovery and Resilience Plan: A macroeconomic assessment of their potential effects
This paper assesses the potential macroeconomic impact of the critical structural reforms designed within the Italian Recovery and Resilience Plan (RRP). The reforms are investigated using a large-scale dynamic stochastic general equilibrium macro-model, adapted to capture the effects of the RRP measures. Exploiting the RRP official documents, we scrutinize and catalog detailed data from 482 milestones and 665 policy targets relevant to our assessment. Each reform is then mapped into the model and simulated, showing its transmission mechanisms and macroeconomic and social impact. We document a significant potential impact on medium- and long-term GDP. The efficacy of the reform package emerges in the long run. In 2050, Italy’s GDP would be 10% higher than in the alternative scenario where no reform is implemented. However, sizeable effects will be observed starting in 2026, when observed GDP would rise by 3.4%. The labor market and education measures primarily drive the impact of the reforms on GDP and employment. We also explore the distributional effects of the reform program. We find that a significant labor and capital income increase accompanies the aggregate positive effect on output.