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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/30695
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| Title: | | Automatic stabilizers and economic crisis: US vs. Europe  |
| Authors: | | Dolls, Mathias Fuest, Clemens Peichl, Andreas |
| Issue Date: | | 2009 |
| Series/Report no.: | | CESifo working paper 2878 |
| Abstract: | | This paper analyzes the effectiveness of the tax and transfer systems in the European Union and the US to act as an automatic stabilizer in the current economic crisis. We find that automatic stabilizers absorb 38 per cent of a proportional income shock in the EU, compared to 32 per cent in the US. In the case of an unemployment shock 48 per cent of the shock are absorbed in the EU, compared to 34 per cent in the US. This cushioning of disposable income leads to a demand stabilization of 26 to 35 per cent in the EU and 19 per cent in the US. There is large heterogeneity within the EU. Automatic stabilizers in Eastern and Southern Europe are much lower than in Central and Northern European countries. We also investigate whether countries with weak automatic stabilizers have enacted larger fiscal stimulus programs. We find no evidence supporting this view. However, we find that active fiscal policy is lower in more open economies. |
| Subjects: | | automatic stabilization crisis liquidity constraints fiscal stimulus |
| JEL: | | E32 E63 H20 H31 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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