The Impact of EMU Enlargement on Structural Reforms: A Political Economy Approach

Louis Jaeck, Sehjeong Kim

Research output: Contribution to journalArticlepeer-review


This paper analyzes the setting of labor market reforms in the European Monetary Union (EMU), as a political compromise pressured by the lobbying of business interests and trade unions. Using a common agency model of lobbying, we model the impact of distorted and non-distorted Central Bank monetary policy on EMU member state incentives to reform its labor market. Paradoxically, a majority of citizens who do not support the reform can lead to an optimal level of reform. We also show that, in a context of EMU enlargement, inflationary policy generates a status quo if there is a majority of non-supporters. Surprisingly, inflationary policy enhances the reform if the share of non-supporters over supporters increases, and weakens it if this share decreases.

Original languageEnglish
Pages (from-to)73-86
Number of pages14
JournalInternational Advances in Economic Research
Issue number1
Publication statusPublished - Feb 2014


  • Common agency
  • European Monetary Union
  • Lobbying
  • Monetary policy
  • Structural reforms

ASJC Scopus subject areas

  • Economics and Econometrics
  • General Economics,Econometrics and Finance


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