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Labour Market Regulation, Fiscal Consolidation, and the Success of Current Account Adjustments

Listed author(s):
  • Antonis Adam
  • Panos Hatzipanayotou

    ()

    (Athens University of Economics and Business)

  • Thomas Moutos

    ()

    (DIEES, AUEB)

In this paper we argue that the strictness of labour market regulations can interact with the mode of fiscal consolidation (tax- based versus spending-based fiscal adjustments) to affect whether current account adjustments are successful. Using data from 81 countries, we are able to identify 147 episodes of current account adjustments, of which 69 are classified as successful. On the basis of a discrete choice cross- sectional time- series model we find that the co-existence of tax-based fiscal consolidations and strict labour market regulations reduces significantly the probability of successful current account adjustments.

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File URL: http://wpa.deos.aueb.gr/docs/Labour.Market.Regulation.pdf
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Paper provided by Athens University of Economics and Business in its series DEOS Working Papers with number 1517.

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Date of creation: 29 Oct 2015
Handle: RePEc:aue:wpaper:1517
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