Download This PaperAn Unemployment Re-Insurance Scheme for the Eurozone? Stabilizing and Redistributive Effects
49 Pages Posted: 15 Apr 2020
Date Written: 2020
Abstract
This paper develops a decomposition framework to study the importance of different stabilization channels of an unemployment re-insurance scheme for the euro area. Running counterfactual simulations based on household micro data for the period 2000–21 and studying the effect of different trigger variables and activation rules, the paper finds that the re-insurance would have cushioned on average 7–14% (3–6%) of employment income losses through interregional (intertemporal) smoothing. The simulated re-insurance scheme would have been revenue-neutral at EA-19, but not at the member-state level. Average annual inpayments and payouts would have been below 0.1 per cent of GDP. A back-of-the-envelope calculation shows that the re-insurance could offset up to 18% of future output shocks. These results suggest that a reinsurance would significantly strengthen public risk sharing in the euro area.
Keywords: European fiscal integration, unemployment re-insurance, automatic stabilizers, euro area reform
JEL Classification: F550, H230, J650
Suggested Citation: Suggested Citation
