IDEAS home Printed from https://ideas.repec.org/a/cup/jnlpup/v31y2011i02p163-186_00.html
   My bibliography  Save this article

Why Did Estonia Choose Fiscal Retrenchment after the 2008 Crisis?

Author

Listed:
  • Raudla, Ringa
  • Kattel, Rainer

Abstract

The budgetary response of Estonia to the 2008 global financial crisis poses a puzzle. While many other countries increased public expenditure and ran high deficits in 2009, the Estonian government was different: it undertook fiscal retrenchment, combining expenditure cuts and tax increases, despite a large drop in economic output. This article explains why the Estonian government opted for fiscal consolidation during the crisis. The ideological position of the governing parties and their desire the join the euro-zone played an important role in driving fiscal discipline. It also argues that the key to understanding Estonia's fiscal decisions in 2009 is what happened in the 1990s: fiscal policy choices became path-dependent as a result of positive feedback loops from previous periods of fiscal consolidation. Path-dependency was further reinforced by institutional capabilities (or lack thereof) created by initial macroeconomic policy choices.

Suggested Citation

  • Raudla, Ringa & Kattel, Rainer, 2011. "Why Did Estonia Choose Fiscal Retrenchment after the 2008 Crisis?," Journal of Public Policy, Cambridge University Press, vol. 31(2), pages 163-186, August.
    • Handle: RePEc:cup:jnlpup:v:31:y:2011:i:02:p:163-186_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0143814X11000067/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Knobel, Alexander (Кнобель, Александр), 2018. "Assessment of the Benefits, Risks and Costs of the Transition to the Regime of Preferential Trade and Economic Interaction with the People's Republic of China [Оценка Выгод, Рисков И Издержек Перех," Working Papers 061827, Russian Presidential Academy of National Economy and Public Administration.
    2. Neven Valev, 2017. "Fear of floating," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 25(1), pages 77-90, January.
    3. Liis Roosaar & Urmas Varblane & Jaan Masso, 2020. "Productivity Gains From Labour Churning In Economic Crisis: Do Foreign Firms Gain More?," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 125, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    4. Mathias Dolls & Clemens Fuest & Andreas Peichl & Christian Wittneben, 2022. "Fiscal Consolidation and Automatic Stabilization: New Results," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(3), pages 420-450, September.
    5. Fabrizio Di Mascio & Alessandro Natalini, 2015. "Fiscal Retrenchment in Southern Europe: Changing patterns of public management in Greece, Italy, Portugal and Spain," Public Management Review, Taylor & Francis Journals, vol. 17(1), pages 129-148, January.
    6. Huseynov, Nijat, 2017. "The Classification of Public Expenditure in Post-Soviet Union States and OECD Member Countries," Public Finance Quarterly, Corvinus University of Budapest, vol. 62(3), pages 380-400.
    7. Raudla Ringa & Cepilovs Aleksandrs & Kattel Rainer & Sutt Linda, 2018. "The European Union as a Trigger of Discursive Change: The Impact of the Structural Deficit Rule in Estonia and Latvia," Central European Journal of Public Policy, Sciendo, vol. 12(2), pages 1-15, December.
    8. Arunas Juska & Charles Woolfson, 2015. "Austerity, labour market segmentation and emigration: the case of Lithuania," Industrial Relations Journal, Wiley Blackwell, vol. 46(3), pages 236-253, May.
    9. Ringa Raudla & Riin Savi, 2015. "The use of performance information in cutback budgeting," Public Money & Management, Taylor & Francis Journals, vol. 35(6), pages 409-416, November.
    10. Zhou, Bihua & Huang, Yun & Zhao, Yihang, 2024. "Research on the incentive effect of the policy combination of carbon-reduction pilot cities," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 456-475.
    11. Egert Juuse & Rainer Kattel, 2014. "Financialisation and the Financial and Economic Crises: The Case of Estonia," FESSUD studies fstudy20, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jnlpup:v:31:y:2011:i:02:p:163-186_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/pup .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.