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Defying the ‘Juncker curse’: can reformist governments be re-elected?

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  • Marco Buti
  • Alessandro Turrini
  • Paul Noord

    ()

  • Pietro Biroli

Abstract

European 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 Info

Article provided by Springer in its journal Empirica.

Volume (Year): 36 (2009)
Issue (Month): 1 (February)
Pages: 65-100

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Handle: RePEc:kap:empiri:v:36:y:2009:i:1:p:65-100

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Web page: http://www.springerlink.com/link.asp?id=100261

Related research

Keywords: Economic and Monetary Union; Structural reforms; Electoral cycle; Financial markets; E61; H30; H60; H70;

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References

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  7. Drazen, Allan & Eslava, Marcela, 2010. "Electoral manipulation via voter-friendly spending: Theory and evidence," Journal of Development Economics, Elsevier, vol. 92(1), pages 39-52, May.
  8. Bertola, Giuseppe, 2007. "Finance and welfare states in globalizing markets," CFS Working Paper Series 2007/31, Center for Financial Studies (CFS).
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  10. Brender, Adi, 2003. "The effect of fiscal performance on local government election results in Israel: 1989-1998," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2187-2205, September.
  11. Peltzman, Sam, 1992. "Voters as Fiscal Conservatives," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 327-61, May.
  12. Marco Buti & Werner Rüger & Alessandro Turrini, 2009. "Is Lisbon Far from Maastricht? Trade-offs and Complementarities between Fiscal Discipline and Structural Reforms," CESifo Economic Studies, CESifo, vol. 55(1), pages 165-196, March.
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Citations

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Cited by:
  1. Paul den Noord, 2011. "Turning the page? EU fiscal consolidation in the wake of the crisis," Empirica, Springer, vol. 38(1), pages 19-51, February.
  2. Alberto Alesina & Dorian Carloni & Giampaolo Lecce, 2012. "The Electoral Consequences of Large Fiscal Adjustments," NBER Chapters, in: Fiscal Policy after the Financial Crisis, pages 531-570 National Bureau of Economic Research, Inc.
  3. Larch, Martin & Van den Noord, Paul & Jonung, Lars, 2010. "The stability and growth pact: lessons from the great recession," MPRA Paper 27900, University Library of Munich, Germany.
  4. Jacques Pelkmans & Lourdes Acedo Montoya & Alessandro Maravalle, 2008. "How product market reforms lubricate shock adjustment in the euro area," European Economy - Economic Papers 341, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  5. Lucifora, Claudio & Moriconi, Simone, 2012. "Political Instability and Labor Market Institutions," IZA Discussion Papers 6457, Institute for the Study of Labor (IZA).

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