Social partnership, competitiveness and exit from fiscal crisis
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Citation: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.
Publisher:Economic & Social Research Institute
Description:Paper delivered at the 22nd Annual Conference of the Irish Economic Association, Westport, Co. Mayo, 25-27 April, 2008