coefficient of the dummy for the simultaneous presence of different types of reforms is negative
(and significant only when pension reforms are concerned) but lower in absolute value compared
with the sum of the coefficients for the corresponding type of reforms in specification (4). This
suggests that, on average, the simultaneous implementation of different types of reforms is
associated with a budgetary deterioration that is lower compared with the cumulated budgetary
deterioration that would result by implementing the same reforms sequentially.
4. Concluding remarks
The main messages from the previous analysis can be summarised in the following way. Looking
at average changes in budget balances in years with and without reforms, no significant differences
emerge for what concern the evolution of the primary CAB in the short-term, irrespective of the
type of reform considered. Product market reforms are associated with slower growth in
government revenues accompanied by corresponding slower growth in expenditure. In the
aftermath of pension reforms, social benefits paid by the government grow at a significantly
slower rate, but the overall impact on the budget is compensated by government revenues also
growing at a slower rate. The analysis of the evolution of budgetary variables during the
implementation of selected structural pension reforms suggests that the impact of reforms can be
quite different depending on the characteristics of the reform, mainly on whether the reforms
mainly introduce parametric changes or also allow for systemic changes in the national framework
for pensions. When the short-term budgetary impact of reforms is evaluated after controlling for
the response of fiscal authorities to the cycle and debt developments, there is evidence that product
and market reforms and pension reforms are associated with a deterioration in budgets (due either
to a direct budgetary impact of reforms or to other reasons, like tax cuts or expenditure increases
aimed at easing resistance to reforms). The impact appears rather weak (a primary CAB reduced
by few decimal GDP points depending on the specific reform considered) and not always
statistically significant. Moreover, the simultaneous implementation of different type of reforms
seems to imply a slighter budgetary deterioration compared with the cumulated budgetary
deterioration arising from the sequential implementation of the same types of reforms.
It is important to stress that the results from the empirical analysis suffer from the fact that the
dataset is of limited size and because any measurement of reforms involve to a certain degree
arbitrary choices which may however matter for results. Caution is needed also in comparing
results across different type of reforms, given that the reform indicators used in the analysis
represent somehow different phenomena, (improvements in indexes of labour market and product
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