Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/37371 
Year of Publication: 
2010
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Fiscal Policy: The Role of Shocks No. A18-V1
Publisher: 
Verein für Socialpolitik, Frankfurt a. M.
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 17 to 33 per cent in the EU and 16 to 28 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: 
H20
H31
E63
Document Type: 
Conference Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.