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



precautionary saving. This is evidently of particular concern since reform within the EU
needs to be concentrated in labour markets.
70

The argument obviously rests on the assumption that private saving behaviour does not
fully offset changes in fiscal policy. Recent pooled cross-country time-series estimation
across OECD countries suggests that the private saving offset to changes in cyclically-
adjusted budget balances could be about half in the first year, rising to some 70% in the
long run (OECD, 2004b). Tests suggest that the only significant exception to this pattern
is to be found outside the euro area (the United States).

2.2     Change in the fiscal position and structural reforms

By the same token, a positive change in the fiscal balance -i.e. fiscal adjustment- could
reduce the probability of reform, for the same reasons that the
level of the fiscal balance can be
expected to increase it: implementing reforms may require a temporary deterioration of the
budgetary situation in order to compensate losers; efforts to improve the fiscal situation often
entail political costs that may hamper the ability of governments to implement other types of
unpopular measures such as structural reforms; fiscal adjustment may depress aggregate demand
at a time when the implementation of structural reforms would on the contrary require additional
resources to be crowded in (see Section 2.1 above).

3. Labour and product market reforms over the period 1994-200471

This section uses OECD indicators to examine recent structural reform patterns. In
particular, it aims to shed light on possible links between fiscal positions and the intensity and
design of the process of structural reform. As background information for the discussion below,
Figure 4 presents a brief overview of fiscal policy patterns across OECD countries over the period
1993-2004.
72 Overall, the Figure shows that cyclically-adjusted budget balances have improved in
most OECD countries during the past decade. No significant differences -in terms of both the
level of and the change in the fiscal stance- can be observed between EU and other OECD
countries.

70.Empirical evidence on the current-account effects of structural reform seems to corroborate these differences across types of structural reform
(Kennedy and Sl0k, 2005).

71. In this, as well as the following, section, EU refers to the 15 members before the recent expansion of membership.

72.This period is chosen so as to match the period covered by the database on labour market reforms (see below).

175



More intriguing information

1. Output Effects of Agri-environmental Programs of the EU
2. The name is absent
3. Restructuring of industrial economies in countries in transition: Experience of Ukraine
4. Prevalence of exclusive breastfeeding and its determinants in first 6 months of life: A prospective study
5. The name is absent
6. Shifting Identities and Blurring Boundaries: The Emergence of Third Space Professionals in UK Higher Education
7. The Complexity Era in Economics
8. Corporate Taxation and Multinational Activity
9. How do investors' expectations drive asset prices?
10. The name is absent
11. Income Mobility of Owners of Small Businesses when Boundaries between Occupations are Vague
12. The name is absent
13. Synchronisation and Differentiation: Two Stages of Coordinative Structure
14. The name is absent
15. The storage and use of newborn babies’ blood spot cards: a public consultation
16. The name is absent
17. The Impact of Individual Investment Behavior for Retirement Welfare: Evidence from the United States and Germany
18. BEN CHOI & YANBING CHEN
19. The name is absent
20. SOME ISSUES CONCERNING SPECIFICATION AND INTERPRETATION OF OUTDOOR RECREATION DEMAND MODELS