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The political economy of structural reforms under a deficit restriction

  • Poplawski Ribeiro, Marcos
  • Beetsma, Roel

This paper analyzes the incentives of a government facing electoral uncertainty to implement structural reforms in the presence of a deficit restriction. In designing a reform package, the government faces a trade-off between enhancing its electoral chances by providing compensation to private individuals and the cost of violating the deficit restriction. Ceteris paribus, tighter sanctions, more volatile macroeconomic shocks and lower income inequality worsen the trade-off.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 30 (2008)
Issue (Month): 1 (March)
Pages: 179-198

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Handle: RePEc:eee:jmacro:v:30:y:2008:i:1:p:179-198
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  1. Buti, Marco & Eijffinger, Sylvester C W & Franco, Daniele, 2003. "Revisiting the Stability and Growth Pact: Grand Design or Internal Adjustment?," CEPR Discussion Papers 3692, C.E.P.R. Discussion Papers.
  2. Beetsma, Roel M.W.J. & Debrun, Xavier, 2007. "The new stability and growth pact: A first assessment," European Economic Review, Elsevier, vol. 51(2), pages 453-477, February.
  3. Dewatripont, M & Roland, G, 1992. "Economic Reform and Dynamic Political Constraints," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 703-30, October.
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  5. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
  6. Roel M. W. J. Beetsma & Xavier Debrun, 2003. "Reconciling Stability and Growth: Smart Pacts and Structural Reforms," IMF Working Papers 03/174, International Monetary Fund.
  7. Blanchard, Olivier J & Giavazzi, Francesco, 2004. "Improving the SGP Through a Proper Accounting of Public Investment," CEPR Discussion Papers 4220, C.E.P.R. Discussion Papers.
  8. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
  9. Catherine Mathieu & Henri Sterdyniak, 2003. "Reforming the Stability and Growth Pact: Breaking the Ice," Documents de Travail de l'OFCE 2003-02, Observatoire Francais des Conjonctures Economiques (OFCE).
  10. repec:ner:tilbur:urn:nbn:nl:ui:12-152958 is not listed on IDEAS
  11. Alesina, Alberto & Tabellini, Guido, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 403-14, July.
  12. Artis, Michael J & Marcellino, Massimiliano & Proietti, Tommaso, 2003. "Dating the Euro Area Business Cycle," CEPR Discussion Papers 3696, C.E.P.R. Discussion Papers.
  13. Razin, Assaf & Sadka, Efraim, 2002. "The Stability and Growth Pact as an Impediment to Privatizing Social Security," CEPR Discussion Papers 3621, C.E.P.R. Discussion Papers.
  14. Forster, Michael & Jesuit, David & Smeeding, Timothy, 2003. "Regional Poverty and Income Inequality in Central and Eastern Europe: Evidence from the Luxembourg Income Study," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  15. Beetsma, Roel & Uhlig, Harald, 1999. "An Analysis of the Stability and Growth Pact," Economic Journal, Royal Economic Society, vol. 109(458), pages 546-71, October.
  16. O'Higgins, Michael & Ruggles, Patricia, 1981. "The Distribution of Public Expenditures and Taxes among Households in the United Kingdom," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 27(3), pages 298-326, September.
  17. Saint-Paul, Gilles, 2002. "Some Thoughts on Macroeconomic Fluctuations and the Timing of Labor Market Reform," IZA Discussion Papers 611, Institute for the Study of Labor (IZA).
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