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

Table 8 Impact of consolidations on job finding rates, distinguishing by EPL strictness

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Dependent variable: Job-finding rate	Budget balance		Revenue		Expenditure		“Top-down” change in structural balance
	Action-based		Action-based		Action-based
Explanatory variables	13 EU countries, 1997-2009		13 EU countries, 1997-2009		13 EU countries, 1997-2009		21 EU countries, 1997-2010
	Low EPL	High EPL	Low EPL	High EPL	Low EPL	High EPL	Low EPL	High EPL
Finding rate (1 lag)	0.845**	0.678**	0.844**	0.672**	0.848**	0.685**	0.822**	0.610**
	[3.872]	[13.09]	[3.894]	[10.59]	[3.881]	[12.74]	[4.587]	[9.540]
Fiscal policy variable	−0.0134	−1.192	−0.0852	−1.860	−0.0417	1.742	0.122	−1.772*
	[−0.0668]	[−1.589]	[−0.254]	[−1.909]	[−0.104]	[1.221]	[0.876]	[−2.285]
Constant	−0.283	3.214**	2.764	2.948**	2.738	3.342*	−0.0706	3.422
	[−0.0898]	[5.319]	[1.262]	[6.126]	[1.243]	[3.958]	[−0.0338]	[1.366]
Observations	66	49	66	49	66	49	104	83
R-squared	0.591	0.662	0.591	0.661	0.591	0.656	0.592	0.586
Number of countries	7	6	7	6	7	6	11	10

+, *, ** 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. 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.