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

Table 3 Impact of consolidations on job separation rates

	(1)	(2)	(3)	(4)
	Action-based fiscal policy variables, 13 EU, 1997-2009			“Top-down” fiscal policy variables, EU27, 1997-2010
Dependent variable: Job separation rate	Budget balance	Revenue	Expenditure	Change in structural balance
	Action-based	Action-based	Action-based
Explanatory variables
Job separation rate (1 lag)	0.778**	0.783**	0.776**	0.767**
	[9.692]	[0.0782]	[0.0806]	[13.18]
Fiscal policy variable	0.0296*	0.0542*	−0.0465	0.0463*
	[2.518]	[0.0239]	[−0.0285]	[2.504]
Constant	0.174	0.172	0.174	0.131
	[1.221]	[0.141]	[0.142]	[1.133]
Observations	115	115	115	225
R-squared	0.720	0.720	0.718	0.685
Number of countries	13	13	13	27

+, *, ** 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. 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.
Legend. Fiscal variables: see footnote to Table 1.