Responsible Governance and the Sustainability of Populist Public Policies. The Implications of Wage-Led Growth Strategy in Romania

Abstract

In the present paper, we focus on the macroeconomic implications of the populist public policies and in particular on the effects of wage led growth strategy, which started to be applied in Romania from January 2017. Such a study is important as a practical example of applying this particular wage related public policy and sets the premises for analyzing its sustainability and its macroeconomic implications and costs. For analyzing the implications of the wage-led growth strategy upon the sustainability of macroeconomic variables, we have used an unrestricted VAR (vector auto regressive) and compared the effect of the impulse response functions with the recent evolutions of the Romanian economy. Thus, we have observed the effect of the wage led growth strategy, by using the average wage, trade deficit, number of employees, inflation rate, labor productivity, and minimum wage as variables. Our study shows that the wage-led growth policy had a strong positive impact on the number of employees and on inflation, increasing it, but a negative impact on productivity. In addition, we have seen a strong positive impact on increasing the trade deficit. These particular evolutions have left the Romanian economy with almost no fiscal and monetary space of maneuver in the face of the exogenous shock produced by the pandemic.

A Model for Personal Financial Planning Towards Retirement

“…Seeing the awareness policies of EU and the Spanish HDI, Spanish society would be a favourable environment for retirement financial planning, nevertheless, there are still some obstacles to overcome. The policies aimed at the unsustainable growth of public spending, are far from the real economic situation of the countries and their economical sustainability (Avram et al, 2020). This policy is not justified salvo in specific times of grave social needs, and it has not promoted the citizen awareness regarding well-being sustainability in retirement and its relationship with savings.…”