The EU fiscal framework has often been criticized for neglecting a possible trade-off between short-term budgetary objectives and the implementation of reforms that could improve public finances in the long term This concern was reflected in the recent reform of the Stability and Growth Pact, which acknowledges that under certain conditions structural reforms can be taken into account both in the preventive and in the corrective arm of the Pact. The aim of the paper is that of making a step forward on the understanding of the empirical relevance of the trade-off between structural reforms in EU countries. The analysis will focus on product and labour market reforms and pension reforms. The main issue investigated will be as follow: which impact do reforms have on budgets in the short term? Results show that, in the aftermath of reforms, budgets do not worsen significantly compared with cases where no reforms occur. However, when the short-term budgetary impact of reforms is evaluated controlling for the response of fiscal authorities to the cycle and debt developments via the estimation of “fiscal reaction functions”, there is evidence that product and market reforms and pension reforms are associated with a deterioration in budgets. The impact appears rather weak (a primary CAB reduced by few decimal GDP points depending on the specific reform considered) and not always statistically significant.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
5217.
Find related papers by JEL classification: E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy H50 - Public Economics - - National Government Expenditures and Related Policies - - - General H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)