Defying the ‘Juncker curse’: can reformist governments be re-elected?
AbstractEuropean policy makers, notably in the euro area, seem to take for granted that the electorate will punish them for bold reform in product and labour markets. This may explain why progress in the euro area has been comparatively limited. This paper posits and, using a dataset for 21 OECD countries, shows that this fear of electoral backlashes is unfounded, provided that financial markets work well. The mechanisms involved are relatively straightforward: well functioning financial markets "bring forward" future yields of structural reform to the present, thus permitting to overcome possible short-run costs. As a result, the electorate tend to reward, not punish, reformist governments. This has important implications for the design of structural reform packages, with financial market reforms being an essential ingredient beside product and labour market reforms.
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Bibliographic InfoArticle provided by Springer in its journal Empirica.
Volume (Year): 36 (2009)
Issue (Month): 1 (February)
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Web page: http://www.springerlink.com/link.asp?id=100261
Economic and Monetary Union; Structural reforms; Electoral cycle; Financial markets; E61; H30; H60; H70;
Other versions of this item:
- Marco Buti & Alessandro Turrini & Paul Van den Noord & Pietro Biroli, 2008. "Defying the 'Juncker Curse': Can Reformist Governments Be Re-elected?," European Economy - Economic Papers 324, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
- Biroli, Pietro & Buti, Marco & Turrini, Alessandro Antonio & Van Den Noord, Paul, 2008. "Defying the 'Juncker Curse’: Can Reformist Governments Be Re-elected?," CEPR Discussion Papers 6875, C.E.P.R. Discussion Papers.
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
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