EMU and the size of the Public Sector Erik Mäkëla
By: Mäkëla, Erik
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Material type: 
ArticlePublisher: 2018Subject(s): UNION ECONOMICA Y MONETARIA | EURO | GASTO PUBLICO | SECTOR PUBLICOOnline resources: Click here to access online
In:
FinanzArchiv v. 74, n. 2, June 2018, p. 200-234 Summary: The purpose of this paper is to examine whether membership in the EMU increases the size of the public sector. The estimation of the effect of the EMU on the ratio of government
outlays to GDP is based on synthetic counterfactuals. It is found that the average size of the public sector in the EMU countries is higher than what it would have been without the monetary unification. The estimated effects are particularly strong in countries that have had the most unstable governments and the highest level of political competition in the eurozone. These findings support the hypothesis that political distortions
of short-sighted governments that produce excessive deficits already under monetary autonomy may be worsened by accession to the monetary union.
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| OP 207/2018/1-1 Bank taxes, bailouts and financial crisis | OP 207/2018/1-2 Real firms in tax systems | OP 207/2018/2 FinanzArchiv | OP 207/2018/2-1 EMU and the size of the Public Sector | OP 207/2018/2-2 Pay-as-you-go pension, bargaining power and fertility | OP 207/2018/3 FinanzArchiv | OP 207/2018/3-1 Welfare-improving consumption tax in the presence of a wage tax under idiosyncratic returns from investment and incomplete markets |
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Resumen.
Bibliografía.
The purpose of this paper is to examine whether membership in the EMU increases the size of the public sector. The estimation of the effect of the EMU on the ratio of government
outlays to GDP is based on synthetic counterfactuals. It is found that the average size of the public sector in the EMU countries is higher than what it would have been without the monetary unification. The estimated effects are particularly strong in countries that have had the most unstable governments and the highest level of political competition in the eurozone. These findings support the hypothesis that political distortions
of short-sighted governments that produce excessive deficits already under monetary autonomy may be worsened by accession to the monetary union.
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