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Table 1 Impact of consolidation on cyclical unemployment

From: Fiscal consolidation and unemployment: does EPL matter?: A look at EU countries

  (1) (2) (3) (4) (5) (6) (7) (8) (9)
  Action-based fiscal policy variables, 13 countries EU, 1980-2009 “Top-down” fiscal policy variables, EU27, 1980-2010
Dependent variable: cyclical unemployment Budget balance Revenue Expenditure Budget balance Budget balance Budget balance Change in structural balance Change in structural revenue Change in structural primary expenditure
Explanatory variables action-based action-based action-based action-based action-based action-based    
Cyclical unemployment (1 lag) 1.206** 1.220** 1.194** 0.731** 1.217** 1.206** 1.098** 1.094** 1.063**
  [27.46] [29.89] [27.45] [29.23] [30.05] [0.0441] [19.30] [19.74] [15.58]
Cyclical unemployment (2 lags) −0.609** −0.611** −0.607**   −0.614** −0.610** −0.491** −0.485** −0.458**
  [−17.67] [−16.80] [−18.92]   [−16.61] [0.0356] [−10.63] [−10.52] [−8.217]
Fiscal policy variable 0.0796+ 0.0184 −0.160* 0.103   0.0751 0.142 −0.0368 −0.138*
  [2.009] [0.285] [−2.609] [1.595]   [0.0465] [1.423] [−1.073] [−2.738]
Fiscal policy variable (1 lag)      0.0410 0.0132    
      [1.072] [0.0466]    
Constant 0.307 −0.236* 0.303 0.0972 0.340+ 0.308 −0.355** −0.289** 0.221
  [1.682] [−2.910] [1.694] [0.455] [1.801] [0.182] [−3.294] [−2.984] [0.983]
Observations 353 353 353 366 353 353 546 547 548
R-squared 0.864 0.862 0.865 0.779 0.862 0.864 0.748 0.746 0.740
Number of countries 13 13 13 13 13 13 27 27 27
  1. +, *, ** denote statistical significance at the 10, 5, 1 per cent level respectively. T tests are reported in square brackets.
  2. Specification. All regressions include country and year fixed effects. Estimation method. Action-based fiscal policy: fixed effect panel OLS. Top-down fiscal policy measures: fixed effect panel instrumental variables (the fiscal policy variable is instrumented with its own lag, the lagged output gap, and the lagged government debt/GDP ratio). Standard errors are robust with respect to hetereoschedasticity and non-independence within country clusters.
  3. Legend. Budget balance, action-based.(source: Devries et al., 2011): year-on-year change in government budget balance associated with fiscal consolidation measures; Revenue, action-based.: year-on-year change in government revenues associated with fiscal consolidation measures on the revenue side; Expenditure, action-based.: year-on-year change in government expenditure associated with fiscal consolidation measures on the expenditure side.
  4. Top-down fiscal policy (source: ECFIN AMECO database). Change in structural balance = year-on-year change in cyclically-adjusted government budget balance, information on one-off measures netted out when available; Change in structural revenue = year-on-year change in cyclically-adjusted government revenues, information on one-off measures netted out when available; Change in structural expenditure = year-on-year change in cyclically-adjusted government primary expenditure, information on one-off measures netted out when available.