OECD Economics Department Working Papers
Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
- ISSN: 18151973 (online)
- https://doi.org/10.1787/18151973
Short-Term Pain for Long-Term Gain
The Impact of Structural Reform on Fiscal of Outcomes in EMU
The 2005 reform of the EU Stability and Growth Pact has provided leeway for governments to let
their fiscal deficit temporarily breach the 3% rule to finance the immediate budgetary cost of structural
reform, such as compensation schemes to offset redistributive effects. Against this backdrop, it is useful to
dispose of empirical estimates of the effect of structural reform on fiscal outcomes, not only the short term
cost but also the long-run fiscal gain stemming from changes in spending parameters and better economic
performance. Based on econometric estimates for a pool of 21 OECD countries, this study finds a
significant net fiscal gain of structural reform.
Keywords: stability and growth pact, Economic and Monetary Union, fiscal policy
JEL:
H6: Public Economics / National Budget, Deficit, and Debt;
H5: Public Economics / National Government Expenditures and Related Policies;
H3: Public Economics / Fiscal Policies and Behavior of Economic Agents;
E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy;
E61: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Policy Objectives; Policy Designs and Consistency; Policy Coordination
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