Removing the roadblocks to growth

Productivity gains and employment in the major advanced economies have sagged in recent years, especially where pre-crisis growth was severely unbalanced. Before they can return to sustainable growth, these countries will need to reallocate labour and capital across sectors. Structural rigidities that hamper this process are likely to hold back the economy's productive potential. Both productivity and employment tend to be weaker in economies with rigid product markets than in ones with more flexible ones. Similarly, employment rates tend to be lower where labour markets are more rigid. Conversely, countries with flexible labour markets recover more quickly from severely imbalanced downturns. They also create more jobs. Reforms that enhance the flexibility of labour and product markets could be swiftly rewarded with improved growth and employment.