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Bringing Macroeconomics Back into the Political Economy of Reform: the Lisbon Agenda and the ‘Fiscal Philosophy’ of EMU

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  • DEBORAH MABBETT
  • WALTRAUD SCHELKLE

Abstract

The Lisbon Strategy supports reform of Member States' tax‐benefit systems while the ‘fiscal philosophy’ of the EMU postulates that governments should allow only automatic stabilizers, built into tax‐benefit systems, to smooth aggregate income. We ask whether these two pillars of EU economic governance are compatible. By exploring how structural reforms affect fiscal stabilization, we complement a political economy literature that asks whether fiscal consolidation fosters or hinders structural reforms. Using EUROMOD, a tax‐benefit model for the EU‐15, we identify the connections between specific tax and benefit reforms and the size of the stabilizers. We conclude that Lisbon‐type reforms may worsen the stabilizing capacity of tax‐benefit systems.

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  • Deborah Mabbett & Waltraud Schelkle, 2007. "Bringing Macroeconomics Back into the Political Economy of Reform: the Lisbon Agenda and the ‘Fiscal Philosophy’ of EMU," Journal of Common Market Studies, Wiley Blackwell, vol. 45(1), pages 81-103, March.
    • Handle: RePEc:bla:jcmkts:v:45:y:2007:i:1:p:81-103
    DOI: 10.1111/j.1468-5965.2007.00704.x
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    Cited by:

    1. Deborah Mabbett & Waltraud Schelkle, 2014. "Searching under the lamp-post: the evolution of fiscal surveillance," Europe in Question Discussion Paper Series of the London School of Economics (LEQs) 5, London School of Economics / European Institute.
    2. Mathias Dolls & Clemens Fuest & Andreas Peichl & Christian Wittneben, 2022. "Fiscal Consolidation and Automatic Stabilization: New Results," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(3), pages 420-450, September.
    3. Alari Paulus & Iva Valentinova Tasseva, 2020. "Europe Through the Crisis: Discretionary Policy Changes and Automatic Stabilizers," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(4), pages 864-888, August.
    4. David Bailey & Helena Lenihan & Alex De Ruyter, 2016. "A cautionary tale of two ‘tigers’: Industrial policy ‘lessons’ from Ireland and Hungary?," Local Economy, London South Bank University, vol. 31(8), pages 873-891, December.
    5. Elisa Baroni & Matteo Richiardi, 2007. "Orcutt’s Vision, 50 years on," LABORatorio R. Revelli Working Papers Series 65, LABORatorio R. Revelli, Centre for Employment Studies.
    6. Deborah Mabbett & Waltraud Schelkle, 2014. "Searching under the lamp-post: the evolution of fiscal surveillance," LEQS – LSE 'Europe in Question' Discussion Paper Series 75, European Institute, LSE.
    7. Sebastian Dullien & Daniela Schwarzer, 2009. "Bringing Macroeconomics into the EU Budget Debate: Why and How?," Journal of Common Market Studies, Wiley Blackwell, vol. 47(1), pages 153-174, January.
    8. AILINCA, Alina Georgeta, 2014. "Automatic Social Stabilizers What They Are And How They Function," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 18(3), pages 45-57.

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