How to Spend 750 Billion Euro? Applying Sacrifice Theory to Determine COVID-19 Compensations in the EU
15 Pages Posted: 8 Jul 2020
Date Written: June 1, 2020
In this note we consider an economic union consisting of sovereign national states. An asymmetric shock hits the union and as a result it decides to set up a fund in order to compensate the countries in the union. We show how sacrifice theory can be used to determine the compensation payments for the countries in a way such that the relative damages after compensation are equal across countries. Finally, we apply our results to determine the COVID-19 compensations payments in the EU.
Keywords: public transfers, sacrifice theory, economic union
JEL Classification: H12, H84
Suggested Citation: Suggested Citation