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Social Partnership, Competitiveness and Exit from Fiscal Crisis

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  • Barry, Frank

    (Trinity College Dublin)

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    Abstract

    The contribution of social partnership to Ireland’s economic boom remains the subject of controversy. This paper analyses at a theoretical level how a multi-period deal on wages and taxation of the type struck in the late 1980s could enhance competitiveness and facilitate an economy in escaping from fiscal crisis. Such a deal would not be possible in a spot labour market. The high unemployment rates of the late 1980s suggest that the Irish labour market of the time cannot be characterised as a spot labour market, however, and such a deal could be struck under these circumstances. Short-term tax reductions would have worsened the short-term budgetary position and hence would have been politically unacceptable. An agreement entailing a commitment by government to future tax reductions in exchange for current wage moderation on the part of organised labour imparts a supply-side stimulus to the economy and improves the immediate fiscal position. The concluding comments provide a gloomy assessment of whether partnership could play an equivalent role in the current recessionary environment.

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    File URL: http://www.esr.ie/Vol40_1/ESRI%2040-1-1.pdf
    File Function: First version, 2009
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    Bibliographic Info

    Article provided by Economic and Social Studies in its journal Economic and Social Review.

    Volume (Year): 40 (2009)
    Issue (Month): 1 ()
    Pages: 1-14

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    Handle: RePEc:eso:journl:v:40:y:2009:i:1:p:1-14

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    Web page: http://www.esr.ie

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    1. Giuseppe Bertola & Allan Drazen, 1991. "Trigger Points and Budget Cuts: Explaining the Effects of Fiscal Austerity," NBER Working Papers 3844, National Bureau of Economic Research, Inc.
    2. Olivier J. Blanchard & Lawrence H. Summers, 1989. "Hysteresis in Unemployment," NBER Working Papers 2035, National Bureau of Economic Research, Inc.
    3. Sutherland, Alan, 1997. "Fiscal crises and aggregate demand: can high public debt reverse the effects of fiscal policy?," Journal of Public Economics, Elsevier, vol. 65(2), pages 147-162, August.
    4. John FitzGerald, 1998. "Wage Formation and the Labour Market," Papers WP095, Economic and Social Research Institute (ESRI).
    5. Brendan Walsh, 2004. "The Transformation of the Irish Labour Market - 1980-2003," Working Papers 200412, School Of Economics, University College Dublin.
    6. Faini, Riccardo, 1996. "Increasing returns, migrations and convergence," Journal of Development Economics, Elsevier, vol. 49(1), pages 121-136, April.
    7. O'Rourke, Kevin, 1995. "Emigration and Living Standards in Ireland since the Famine," Journal of Population Economics, Springer, vol. 8(4), pages 407-21, November.
    8. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-93.
    9. Andersson, Fredrik & Forslid, Rikard, 2004. "A fundamental asymmetry of asymmetric shocks," European Economic Review, Elsevier, vol. 48(2), pages 337-351, April.
    10. Barry, Frank, 2002. "FDI, Infrastructure and the Welfare Effects of Labour Migration," CEPR Discussion Papers 3380, C.E.P.R. Discussion Papers.
    11. Slobodan Djajic & Douglas D. Purvis, 1985. "Intersectoral Adjustment and the Dynamics of Wages and Employment Opportunities," Working Papers 603, Queen's University, Department of Economics.
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    Cited by:
    1. Niamh Hardiman & Muiris MacCarthaigh, 2013. "How Governments Retrench In Crisis: The Case of Ireland," Working Papers 201315, Geary Institute, University College Dublin.
    2. Sebastian Dellepiane & Niamh Hardiman, 2012. "Fiscal Politics In Time: Pathways to Fiscal Consolidation, 1980-2012," Working Papers 201228, Geary Institute, University College Dublin.
    3. Eoin O'Malley, 2012. "A Survey of Explanations for the Celtic Tiger Boom," The Institute for International Integration Studies Discussion Paper Series iiisdp417, IIIS.

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