IDEAS home Printed from https://ideas.repec.org/p/rif/dpaper/1050.html
   My bibliography  Save this paper

Structural Reforms in the EU and Political Myopia in Economic Policies

Author

Listed:
  • Alho, Kari E.O.

Abstract

The paper considers economic reforms in the EU using an economic-political model which captures the possible myopia in economic policies, and analyses reforms in taxation, the welfare state, and in the labour and product markets. We show that high taxes and an extensive welfare state are likely to be the case under myopia as compared to the social optimum. We also consider the interaction between the reform activity and the Stability and Growth Pact, which hampers reforms in tax policies, but is conducive to reforming the wel-fare state, the product and labour markets, although the magnitude of these impacts is not marked under the actual tightness of the Pact. We also find that economic and political considerations tend to favour the emphasis to be put on reforming the goods market, instead of the labour market, which has also broadly speaking been the case in reality in the EU. Econometric evidence presented in the paper also supports these results. Coordination of re-forms in the EU is most important in the case of the product market, but not in other fields.

Suggested Citation

  • 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.
  • Handle: RePEc:rif:dpaper:1050
    as

    Download full text from publisher

    File URL: http://www.etla.fi/wp-content/uploads/2012/09/dp1050.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Lars Calmfors & Asa Johansson, 2006. "Nominal Wage Flexibility, Wage Indexation and Monetary Union," Economic Journal, Royal Economic Society, vol. 116(508), pages 283-308, January.
    2. Sébastien Jean & Giuseppe Nicoletti, 2015. "Product market regulation and wage premia in Europe and North America: An empirical investigation," International Economics, CEPII research center, issue 144, pages 1-28.
    3. 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.
    4. Bovenberg, A. Lans & Graafland, Johan J. & de Mooij, Ruud A., 2000. "Tax reform and the Dutch labor market: an applied general equilibrium approach," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 193-214, October.
    5. Alho, Kari, 2002. "The Equilibrium Rate of Unemployment and Policies to Lower It: The Case of Finland," Discussion Papers 839, The Research Institute of the Finnish Economy.
    6. Sibert, Anne & Sutherland, Alan, 2000. "Monetary union and labor market reform," Journal of International Economics, Elsevier, vol. 51(2), pages 421-435, August.
    7. 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.
    8. Marco Buti, 2006. "Will the new stability and growth pact succeed? An economic and political perspective," European Economy - Economic Papers 2008 - 2015 241, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    9. Bentolila, Samuel & Saint-Paul, Gilles, 2000. "Will EMU Increase Eurosclerosis?," CEPR Discussion Papers 2423, C.E.P.R. Discussion Papers.
    10. Alho, Kari & Erkkilä, Mika & Kotilainen, Markku, . "The Economics and Policies of Integration - a Finnish Perspective," ETLA A, The Research Institute of the Finnish Economy, number 22.
    11. Heijdra, Ben J., 2017. "Foundations of Modern Macroeconomics," OUP Catalogue, Oxford University Press, edition 3, number 9780198784135.
    12. Peter Hoeller & Claude Giorno, 2006. "Nothing Ventured, Nothing Gained: The Long-Run Fiscal Reward of Structural Reforms," OECD Economics Department Working Papers 493, OECD Publishing.
    13. Kotilainen, Markku, "undated". "Economic Shocks, Progressiveness of Taxation, and Indexation of Taxes and Public Expenditure in EMU," Discussion Papers 1011, The Research Institute of the Finnish Economy.
    14. Hatzius, Jan, 2000. "Foreign direct investment and factor demand elasticities," European Economic Review, Elsevier, vol. 44(1), pages 117-143, January.
    15. Sibert, Anne, 1999. "Monetary Integration and Economic Reform," Economic Journal, Royal Economic Society, vol. 109(452), pages 78-92, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marco Buti & Werner Rüger & Alessandro Turrini, 2009. "Is Lisbon Far from Maastricht? Trade-offs and Complementarities between Fiscal Discipline and Structural Reforms," CESifo Economic Studies, CESifo, vol. 55(1), pages 165-196, March.

    More about this item

    Keywords

    economic reform; EU; myopia;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rif:dpaper:1050. 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: (Kaija Hyvönen-Rajecki). General contact details of provider: http://edirc.repec.org/data/etlaafi.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.