Proceedings from the ECFIN Workshop "The budgetary implications of structural reforms" - Brussels, 2 December 2005



Table 9: Budget balances, labour market reforms (reform dummies defined as policies reducing the
restrictiveness of EPL or the generosity of unemployment subsidies. EU-14 except EL, 1986-2001)

Dependent variable:
primary CAB
Explanatory variables

(1)

(2)

Constant

-2.6***

-2.48***

(-5.11)

(-4.83)

Lagged dependent

0.73***

0.76***

variable

(18.76)

(23.71)

Output gap

-0.014

0.034

(-0.32)

(0.08)

Lagged debt/GDP ratio

0.049***

0.046***

(6.24)

(5.64)

Dummy for labour

-0.27

market reforms based on
EPL restrictiveness
reduction
Dummy for labour

(-1.36)

0.036

market reforms based on
reductions in the
generosity of
unemployment subsidies

(0.19)

N. obs.

238

238

R sq.

0.70

0.70

Chi sq

1174

1164

Notes: Estimations method: fixed effects, instrumental variables
regression. The output gap is instrumented with its own lag and the US
lagged output gap. All fiscal variables are expressed as shares on
potential output.

Z statistics are reported in parentheses. *, **, and *** denote,
respectively, significance at the 10, 5 and 1 per cent level.
Coefficients for country fixed effects are not reported.

Source: Authors’ calculation on FRDB data and DG ECFIN AMECO
database.

127



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