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

Table 2 Impact of consolidation on unemployment, action-based fiscal policy variables 13 countries EU, 1980-2009

	(1)	(3)	(3)
Dependent variable: unemployment rate	Budget balance	Revenue	Expenditure
Explanatory variables	action-based	action-based	action-based
Unemployment (1 lag)	1.459**	1.481**	1.457**
	[22.84]	[21.55]	[21.83]
Unemployment (2 lags)	−0.589**	−0.603**	−0.589**
	[−10.53]	[−9.981]	[−10.65]
Fiscal policy variable	0.129+	0.145	−0.179*
	[2.132]	[1.138]	[−2.920]
Constant	0.970**	0.928**	0.987**
	[4.624]	[4.415]	[4.509]
Observations	353	353	353
R-squared	0.928	0.927	0.928
Number of countries	13	13	13

+, *, ** denote statistical significance at the 10, 5, 1 per cent level respectively. T tests are reported in square brackets.
Specification. All regressions include country and year fixed effects.
Estimation method. fixed effect panel OLS, standard errors robust with respect to hetereoschedasticity and non-independence within country clusters.
Legend: for a description of the fiscal variables see notes to Table 1.