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EU Fiscal Policy Coordination in Hard TimesFree Riders on the Storm$
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Charlotte Rommerskirchen

Print publication date: 2019

Print ISBN-13: 9780198829010

Published to Oxford Scholarship Online: March 2019

DOI: 10.1093/oso/9780198829010.001.0001

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Theorizing Fiscal Policy Coordination

Theorizing Fiscal Policy Coordination

Chapter:
(p.26) 3 Theorizing Fiscal Policy Coordination
Source:
EU Fiscal Policy Coordination in Hard Times
Author(s):

Charlotte Rommerskirchen

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198829010.003.0003

Fiscal policy coordination is marred by a classic collective action problem; it pays to be egoistical. Member states have an incentive to under- or over-stimulate their economies (what this chapter terms growth and stability free riding), despite a common interest in coordinated policies. Building on Mancur Olson’s premise on collective action failure, the chapter develops three research questions that guide the empirical investigation. These relate to the group latency of EU membership, the evidence for collective action, and finally the provision of incentives to keep free riding at bay. The theme running through this chapter is that the interdependence of EU economies requires cooperative solutions to common problems.

Keywords:   collective action, Mancur Olson, free riding, fiscal stimulus, fiscal policy coordination, latent groups, political business cycle, fiscal rules, bond markets

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