evidence of a slight deterioration in budgets (in the order of few decimal of percentage points of
GDP) which is however not always statistically different from zero.
The remainder of the paper is structured as follows. The next section illustrates the main
arguments for the emergence of a possible trade off between budgetary discipline in the short-term
versus the long-term related with numerical fiscal rules preventing the implementation of
structural reforms. It also outlines the provisions concerning structural reforms that have been
included in the reform of the Stability and Growth Pact. Section 3 presents the empirical analysis.
The concluding remarks follow.
2. Structural reforms, numerical deficit rules, and the trade-off between short and long-term
fiscal discipline.
2.1. Structural reforms: definitions, main features, and their long-term impact on public
finances
The term reform is used with reference to rather different types of policy interventions: trade
reforms, labour market reforms, tax reforms, pension reforms, health sector reforms, etc. In
general, compared with other types of policies, reforms (i) have a long-lasting impact and (ii)
concern the general functioning of economic (market or state) institutions rather than specific
elements. The adjective “structural” often accompanies the word reform, to remark the fact that the
policy concerned are aimed at affecting the economy in its structure.
Sometimes by reform it is meant a policy aimed at modifying the institutional setting shaping the
interplay among private economic agents. This is typically the case of reforms changing the
functioning of markets (product or factor markets). In other instances, reforms may be aimed at
modifying the working of government. This is the case for instance of reforms affecting the
working of the welfare state (e.g., pension or health care reforms) or the set-up of policy
institutions (e.g., reforms concerning the institutional set-up of monetary authorities, or the status
of authorities enforcing competition policy or regulating public utilities).
Another relevant distinction is between reforms that modify the features of existing policies and
institutions (e.g., pension reforms modifying social security rates) from those that replace or
complement existing policies and institutions with new ones (e.g., pension reforms introducing
new pension pillars). The former are often refer to as parametric reforms, the latter as systemic. A
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