Figure 5.6 (continued)
Portugal

Spain

---estimated elasticity from 5.7 ----elasticities OECD —zero elasticity (no automatic stabilisers)
Fiscal policy might be more seriously biased against automatic stabilisers than our ‘zero-
elasticity’ scenario suggests. There is quite some evidence that in European countries,
governments have been systematically overturning the working of automatic stabilisers
(GaH and Perotti, 2003; Lane, 2003). The true expenditure and revenue elasticities may
therefore be biased upward in comparison to observed elasticities. As a consequence, we
150
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