On these criteria, Denmark, Finland and the Netherlands stand out for having made deep
policy reforms in a wide range of areas since the mid-1990s, opening up for possible synergies.83
From a broader perspective, it is remarkable that the vast majority of countries located in the
upper left quadrant of Figure 7 are EU members. At the same time, virtually no EU country - with
the exception of Greece - is located in the lower right quadrant. This suggests that relative to the
OECD average a number of EU countries have pursued both far-reaching and comprehensive
reform strategies, while only few have confined themselves to either minor reforms or reforms
covering only a small number of areas.
3.3 Fiscal policy patterns and labour market reforms: preliminary evidence
Over and above the usual caveats that apply to simple correlation analysis, any descriptive
study is likely to be further complicated by the fact that any causal relationship between fiscal
positions and the propensity to undertake reforms runs in both directions. In order to minimise this
problem, Panel A of Figure 8 plots the cyclically-adjusted fiscal balances in 1993 -i.e. before the
period under study- against subsequent reform intensity over the period 1994-2004. While
positive, the correlation is insignificant at conventional confidence levels (p-value = 0.45).
Considering reform intensity over the shorter period 1994-1998 yields a larger but still
insignificant correlation (p-value = 0.16).
Still, the correlation becomes statistically significant when only EU countries are
considered (Figure 8, Panel B). Likewise, it may not be a coincidence that the fiscal positions of
top reformers (Denmark, Finland, the Netherlands and Germany to a lesser extent, New Zealand if
the major reforms of the early 1990s had been taken into account) were among the most
favourable across the OECD back in 1993.
83. New Zealand would have fallen in the same category if the major reforms undertaken in the early 1990s, in particular within the context
of the 1991 Employment Contracts Act, had been taken into account.
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