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Bringing macroeconomics back into the political economy of reform: The Lisbon Agenda and the 'fiscal philosophy' of EMU

By Deborah Mabbett and W. Schelkle

Abstract

The Lisbon Strategy supports reform of member states’ tax-benefit systems while the ‘fiscal philosophy’ of the EU postulates that governments should allow only automatic stabilisers, built into tax-benefit systems, to smooth aggregate income. We ask whether these two pillars of EU economic governance are compatible. By exploring how structural reforms affect fiscal stabilisation, we complement a political economy literature that asks whether fiscal consolidation fosters or hinders structural reforms. We conclude, based on simulations in EUROMOD, that Lisbon-type reforms may worsen the stabilising capacity of tax-benefit systems

Topics: polsoc
Publisher: Wiley-Blackwell
Year: 2007
OAI identifier: oai:eprints.bbk.ac.uk.oai2:259

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