Drowned by Numbers? Stabilization Properties of an EU-wide Unemployment Insurance System
Farvaque E. and F. Huart, “Drowned by Numbers? Stabilization Properties of an EU-wide Unemployment Insurance System”, Applied Economics, 50(38), 4153-4181, 2018
Posted: 22 Apr 2020
Date Written: February 25, 2018
The recent crisis has given rise to proposals for the creation of a European unemployment insurance system. We simulate an EU-wide mechanism under various scenarios, varying methods of financing (common or country-specific contribution rates) and triggers for pay-outs (all time or contingent clauses). We analyse the impact of the system using different measures of stabilization under different fiscal multipliers. A system operating during bad times (periods where the increase in unemployment is large) would reduce GDP growth variability but also growth correlation among member countries. Hence, there is a trade-off between stabilization and synchronization of national business cycles.
Keywords: Intergovernmental Transfers, Fiscal Union, Monetary Union, European Integration, Unemployment Insurance
JEL Classification: F45, F36, H77, H87, E60
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