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

Authors

Publication Date

Jun 2007

Summary

The Lisbon Strategy supports reform of Member States' tax-benefit systems while the ‘fiscal philosophy’ of the EMU postulates that governments should allow only automatic stabilizers, 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 stabilization, we complement a political economy literature that asks whether fiscal consolidation fosters or hinders structural reforms. Using EUROMOD, a tax-benefit model for the EU-15, we identify the connections between specific tax and benefit reforms and the size of the stabilizers. We conclude that Lisbon-type reforms may worsen the stabilizing capacity of tax-benefit systems.

Volume

Volume: 45 (1): 81-103

DOI

http://dx.doi.org/10.1111/j.1468-5965.2007.00704.x

Publication type

Journal Article

Research area

Tax and benefit systems

Links

http://serlib0.essex.ac.uk/record=b1599608~S5 - http://serlib0.essex.ac.uk/record=b1599608~S5

Notes

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Related Publications

Fiscal stabilisers in Europe: the macroeconomic impact of tax and benefit systems
Deborah Mabbett, EUROMOD Working Paper Series -01 Nov 2004

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