Is Lisbon Far from Maastricht? Trade-offs and Complementarities between Fiscal Discipline and Structural Reforms
While according to the so-called 'Brussels-Frankfurt consensus', sound fiscal policies and structural reforms support each other, it is often claimed that the EU fiscal framework, by reducing the budgetary room for manoeuvre and the political capital of governments, may deter reforms. The aim of this article is to explore which factors determine the relationship between fiscal discipline and reforms. By means of a simple model we show that, depending on the time horizon of the government, structural reforms may either be complementary to, or a substitute for, fiscal discipline. If governments are forward-looking, substitution is more likely; if governments are short-sighted, reforms and fiscal discipline may become complementary. We provide empirical evidence supporting this argument. In a sample of EU-15 countries over the past three decades, the introduction of the Maastricht constraints at the beginning of the 1990s does not seem to have affected the probability of labour market reforms on average, but had a positive and significant impact on countries with governments facing elections in the current or forthcoming year (which are hence assumed to behave myopically). Our results suggest that if governments are short-sighted, then the expectation that relaxing fiscal constraints may help to boost structural reforms may not be well-founded. (JEL codes: E62, H50, H55, H62, J58, L50) Copyright , Oxford University Press.
If you experience problems downloading a file, check if you have the proper application to view it first. 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.
Volume (Year): 55 (2009)
Issue (Month): 1 (March)
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: 01865 267 985
Web page: http://cesifo.oxfordjournals.org/
More information through EDIRC
|Order Information:||Web: http://www.oup.co.uk/journals|
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.:
- Schuknecht, Ludger & Tanzi, Vito, 2005. "Reforming public expenditure in industrialised countries: are there trade-offs?," Working Paper Series 0435, European Central Bank.
- Hallett, Andrew Hughes & Jensen, Svend E. Hougaard & Richter, Christian, 2005. "The European economy at the cross roads: Structural reforms, fiscal constraints, and the Lisbon Agenda," Research in International Business and Finance, Elsevier, vol. 19(2), pages 229-250, June.
- Duval, Romain & Elmeskov, Jørgen, 2006.
"The effects of EMU on structural reforms in labour and product markets,"
Working Paper Series
0596, European Central Bank.
- Romain Duval & Jørgen Elmeskov, 2005. "The Effects of EMU on Structural Reforms in Labour and Product Markets," OECD Economics Department Working Papers 438, OECD Publishing.
- Marco Buti & Lucio R. Pench, 2004. "Why Do Large Countries Flout the Stability Pact? And What Can Be Done About It?," Journal of Common Market Studies, Wiley Blackwell, vol. 42(5), pages 1025-1032, December.
- 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.
- Assaf Razin & Efraim Sadka, 2002. "The Stability and Growth Pact as an Impediment to Privatizing Social Security," NBER Working Papers 9278, National Bureau of Economic Research, Inc.
- Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR;CES;MSH, vol. 13(26), pages 65-113, 04.
- Giuseppe Nicoletti & Stefano Scarpetta, 2003.
"Regulation, Productivity and Growth: OECD Evidence,"
OECD Economics Department Working Papers
347, OECD Publishing.
- Giuseppe Nicoletti & Stefano Scarpetta, 2003. "Regulation, productivity and growth: OECD evidence," Economic Policy, CEPR;CES;MSH, vol. 18(36), pages 9-72, 04.
- Nicoletti, Giuseppe & Scarpetta, Stefano, 2003. "Regulation, productivity, and growth : OECD evidence," Policy Research Working Paper Series 2944, The World Bank.
- Roberto Perotti, 2002. "Estimating the effects of fiscal policy in OECD countries," Economics Working Papers 015, European Network of Economic Policy Research Institutes.
- Marco Buti, 2006. "Will the new stability and growth pact succeed? An economic and political perspective," European Economy - Economic Papers 241, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
- Khalid Sekkat & Marco Buti & Carlos Martinez-Mongay & Paul van den Noord, 2003. "Automatic fiscal stabilisers in EMU: a conflict between efficiency and stabilization?," ULB Institutional Repository 2013/7354, ULB -- Universite Libre de Bruxelles.
- Deroose, Servaas & Turrini, Alessandro Antonio, 2005. "The Short-Term Budgetary Implications of Structural Reforms. Evidence from a Panel of EU Countries," CEPR Discussion Papers 5217, C.E.P.R. Discussion Papers.
- André Sapir & Philippe Aghion & Giuseppe Bertola & Martin Hellwig & Jean Pisani-Ferry & Bernard Lange & José Viñals & Helen Wallace & Marco Buti & Mario Nava & Peter Smith, 2004.
"An agenda for a growing Europe: the Sapir report,"
ULB Institutional Repository
2013/8070, ULB -- Universite Libre de Bruxelles.
- Roel M. W. J. Beetsma & Xavier Debrun, 2004.
"Reconciling Stability and Growth: Smart Pacts and Structural Reforms,"
IMF Staff Papers,
Palgrave Macmillan, vol. 51(3), pages 431-456, November.
- 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.
- Beetsma, Roel & Debrun, Xavier, 2003. "Reconciling Stability and Growth: Smart Pacts and Structural Reforms," CEPR Discussion Papers 3930, C.E.P.R. Discussion Papers.
- Frank Smets & Raf Wouters, 2002.
"An estimated dynamic stochastic general equilibrium model of the euro area,"
Working Paper Research
35, National Bank of Belgium.
- Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, 09.
- Alho, Kari E.O., 2006. "Structural Reforms in the EU and Political Myopia in Economic Policies," Discussion Papers 1050, The Research Institute of the Finnish Economy.
- Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
- Perotti, Roberto, 2002. "Estimating the effects of fiscal policy in OECD countries," Working Paper Series 0168, European Central Bank.
- repec:reg:rpubli:74 is not listed on IDEAS
- Marco Buti & Paul Noord, 2004. "Fiscal Discretion and Elections in the Early Years of EMU," Journal of Common Market Studies, Wiley Blackwell, vol. 42(4), pages 737-756, November.
- Bean, Charles, 1998. "Monetary Policy under EMU," Oxford Review of Economic Policy, Oxford University Press, vol. 14(3), pages 41-53, Autumn.
When requesting a correction, please mention this item's handle: RePEc:oup:cesifo:v:55:y:2009:i:1:p:165-196. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.