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Table 6 Impact of consolidations on cyclical unemployment by EPL strictness,

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

  (1) (2) (3) (4) (5) (6) (7) (8)
Dependent variable: cyclical unemployment Budget balance Revenue Expenditure “Top-down” change in structural balance
  Action-based Action-based Action-based  
Explanatory variables 13 EU countries, 1980-2009 13 EU countries, 1980-2009 13 EU countries, 1980-2009 21 EU countries, 1980-2010
  Low EPL High EPL Low EPL High EPL Low EPL High EPL Low EPL High EPL
Cyclical unemployment (1 lag) 1.230** 1.222** 1.247** 1.228** 1.212** 1.217** 1.219** 1.191**
  [27.28] [12.95] [29.48] [13.26] [25.51] [13.45] [19.49] [22.91]
Cyclical unemployment (2 lags) −0.625** −0.618** −0.630** −0.619** −0.624** −0.616** −0.599** −0.602**
  [−16.92] [−8.179] [−14.33] [−7.887] [−19.25] [−8.326] [−13.30] [−10.46]
Fiscal policy variable 0.0947 0.0415 0.0567 −0.0103 −0.178+ −0.0891 0.0141 0.281
  [1.828] [0.464] [0.775] [−0.0553] [−2.107] [−0.799] [0.250] [1.473]
Constant 0.598* −0.140 0.643* 0.330 0.584* −0.184 0.268 −0.173
  [2.610] [−0.834] [2.672] [1.510] [2.651] [−0.336] [1.781] [−1.050]
Observations 196 157 196 157 196 157 260 216
R-squared 0.889 0.859 0.886 0.859 0.891 0.859 0.855 0.794
Number of countries 7 6 7 6 7 6 11 10
  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.
  3. 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.
  4. Legend. Fiscal variables: see footnote to Table 1. The grouping of countries with respect to the OECD EPL indicator for permanent employment is built on the basis of the median country-specific average value of the indicator over the sample period.