Defying the 'Juncker Curse?: Can Reformist Governments Be Re-elected?

Alessandro Turrini, Marco Buti, Paul Van den Noord and Pietro Biroli ()

No 6875, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: European policy makers, notably in the euro area, seem to take for granted that the electorate will punish them for bold reform in product and labour markets. This may explain why progress in the euro area has been comparatively limited. This paper posits and, using a dataset for 21 OECD countries, shows that this fear of electoral backlashes is unfounded, provided that financial markets work well. The mechanisms involved are relatively straightforward: well functioning financial markets "bring forward" future yields of structural reform to the present, thus permitting to overcome possible short-run costs. As a result, the electorate tend to reward, not punish, reformist governments. This has important implications for the design of structural reform packages, with financial market reforms being an essential ingredient beside product and labour market reforms.

Keywords: Economic and monetary union; Electoral cycle; Financial markets; Structural reforms (search for similar items in EconPapers)
JEL-codes: E61 H30 H60 H70 (search for similar items in EconPapers)
Date: 2008-06
New Economics Papers: this item is included in nep-cdm, nep-eec and nep-mac
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Defying the ‘Juncker curse’: can reformist governments be re-elected? (2009)
Working Paper: Defying the 'Juncker Curse': Can Reformist Governments Be Re-elected? (2008)
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