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Defying the 'Juncker Curse’: Can Reformist Governments Be Re-elected?

  • Biroli, Pietro
  • Buti, Marco
  • Turrini, Alessandro Antonio
  • Van Den Noord, Paul

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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6875.

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Date of creation: Jun 2008
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Handle: RePEc:cpr:ceprdp:6875
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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.
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