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Table 9 Impact of consolidations on the share of long-term unemployment, distinguishing 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: long-term unemployment ratio Budget balance Revenue Expenditure “Top-down” change in structural balance
  Action-based Action-based Action-based
Explanatory variables 13 EU countries, 1992-2009 13 EU countries, 1992-2009 13 EU countries, 1992-2009 21 EU countries, 1992-2010
  Low EPL High EPL Low EPL High EPL Low EPL High EPL Low EPL High EPL
Long-term unemployment share (1 lag) 0.832** 0.798** 0.839** 0.804** 0.831** 0.796** 0.791** 0.688**
  [13.05] [13.71] [16.20] [12.77] [12.69] [13.45] [19.70] [10.42]
Fiscal policy variable −0.333 1.026 −0.425 1.683+ 0.617 −1.179 −0.893* 0.934
  [−0.587] [1.161] [−0.483] [2.028] [0.682] [−0.708] [−2.377] [0.721]
Constant 3.134 11.08* 3.651* 10.95* 3.168 12.84** 10.71** 14.36**
  [1.395] [3.765] [2.492] [3.765] [1.400] [4.239] [5.371] [3.987]
Observations 116 90 116 90 116 90 168 143
R-squared 0.901 0.843 0.901 0.842 0.901 0.841 0.831 0.689
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 overall EPL indicator for permanent employment is built on the basis of the median country-specific average value of the indicator over the sample period.