Social partnership Competitiveness Fiscal policy Ireland
Economic & Social Research Institute
Barry, Frank. 'Social partnership, competitiveness and exit from fiscal crisis'. - Economic & Social Review, Vol. 40, no. 1, Spring, 2009, pp. 1–14, Dublin: Economic & Social Research Institute
The contribution of social partnership to Ireland’s economic boom remains the subject of controversy. This paper analyses at a theoretical level how a multi-period deal on wages and taxation of the type struck in the late 1980s could enhance competitiveness and facilitate an economy in escaping from fiscal crisis. Such a deal would not be possible in a spot labour market. The high unemployment rates of the late 1980s suggest that the Irish labour market of the time cannot be characterised as a spot labour market, however, and such a deal could be struck under these circumstances. Short-term tax reductions would have worsened the short-term budgetary position and hence would have been politically unacceptable. An agreement entailing a commitment by government to future tax reductions in exchange for current wage moderation on the part of organised labour imparts a supply-side stimulus to the economy and improves the immediate fiscal position. The concluding comments provide a gloomy assessment of whether partnership could play an equivalent role in the current recessionary environment.
Paper delivered at the 22nd Annual Conference of the Irish Economic Association,
Westport, Co. Mayo, 25-27 April, 2008
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