Reconciling Stability and Growth; Smart Pacts and Structural Reforms
This paper analyzes the decision of a government facing electoral uncertainty to implement structural reforms in the presence of fiscal restraints similar to the Stability and Growth Pact. The model shows that a pact may harm structural reforms, sacrificing future growth for present stability. The welfare gains brought about by a pact depend on a trade-off between the reduction in the deficit bias and the induced reduction in the amount of structural reform. A pact becomes more attractive (“smarter”) if it takes into account the fiscal impact of structural reforms, in line with a recent proposal by the European Commission.
|Date of creation:||01 Sep 2003|
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- Gilles Saint-Paul, 2002.
"The Political Economy of Employment Protection,"
Journal of Political Economy,
University of Chicago Press, vol. 110(3), pages 672-701, June.
- Gilles Saint Paul, 1999. "The political economy of employment protection," Economics Working Papers 355, Department of Economics and Business, Universitat Pompeu Fabra.
- Saint-Paul, Gilles, 1999. "The Political Economy of Employment Protection," CEPR Discussion Papers 2109, C.E.P.R. Discussion Papers.
- Sibert, Anne & Sutherland, Alan, 2000. "Monetary union and labor market reform," Journal of International Economics, Elsevier, vol. 51(2), pages 421-435, August.
- Saint-Paul, Gilles, 2002. "Macroeconomic Fluctuations and the Timing of Labour Market Reforms," CEPR Discussion Papers 3646, C.E.P.R. Discussion Papers.
- Saint-Paul, Gilles, 2004. "Macroeconomic Fluctuations and the Timing of Labor Market Reform," IDEI Working Papers 314, Institut d'Économie Industrielle (IDEI), Toulouse.
- Saint-Paul, Gilles, 2002. "Macroeconomic Fluctuations and the Timing of Labor Market Reform," IDEI Working Papers 146, Institut d'Économie Industrielle (IDEI), Toulouse.
- Gert Schnabel, 2002. "Output trends and Okun's law," BIS Working Papers 111, Bank for International Settlements.
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- Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
- 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). Full references (including those not matched with items on IDEAS)
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